KKR-, CDH-backed dairy raises $448m in IPO

China Modern Dairy listed Friday on the Hong Kong Stock Exchange, allowing KKR to sell a reported 228m shares.

Kohlberg Kravis Roberts and China-focused CDH Investments-backed China Modern Dairy Holding, also known as Ma Anshan Modern Farming, has raised HK$3.5 billion (€338.8 million; $450.8 million) from an initial public offering (IPO) on the Hong Kong Stock Exchange (HKEx).

The dairy farming company, which listed today, sold 1.2 billion shares at HK$2.89 per share. A third of the shares were sold by existing shareholders, according to its filing to the HKEx. KKR is reportedly selling 228 million shares, according to Hong Kong newspaper The Standard.

The bookrunners of the IPO are Citigroup and UBS. Global law firm Freshfields Bruckhaus Deringer advised on the transaction.

In June 2009, KKR completed “a series of” investments in the Chinese dairy farming company. While it declined to comment on the total amount invested or the stake acquired, the firm noted that it had invested $99.2 million in the company for a minority stake in December 2008 in its annual report that year. Chinese media has reported that the 2008 investment was made in parallel with an investment from CDH and was valued at $100 million.

It is not clear what stake either firm will hold in China Modern following today’s listing. KKR declined to comment, and neither CDH nor Modern Dairy could be reached by press time.

Headquartered in China’s Anhui province, Modern Dairy is one of the largest operators of large-scale dairy farms in China. Its primary business is raising dairy cows and selling raw milk to branded dairy companies for processing into various dairy products. The company has a total production capacity of more than 150,000 tons of raw milk per year.

KKR has been an active investor in China, making investments in the country from its $4 billion pan-Asian fund, which closed in 2007. The firm completed its first deal in China the same year, when it invested $115 million for a minority stake in Tianrui Cement.

In the third quarter of this year, KKR held a first close on $700 million for its China Growth Equity fund, which has a target commitment of around $1 billion and is the firm’s first-ever country-specific fund.