KKR completes Chinese dairy farming investment

The global buyout firm has completed 'a series of investments' reportedly worth $150m in Ma Anshan Modern Farming. Last year the firm said it had invested nearly $100m for a minority stake in the growing Chinese dairy.

Kohlberg Kravis Roberts has completed “a series of investments” in Ma Anshan Modern Farming, a Chinese dairy company headquartered in Anhui province. The investment will be used to set up between 20 and 30 more large scale farms in China to pursue acquisitions over the next few years.

KKR declined to comment on the amount invested or the stake acquired. In its 2008 annual report, KKR noted that it invested $99.2 million in Ma Anshan for a minority stake in December. Media reports have estimated the firm has poured $150 million into the dairy, which 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 was founded in 2005 by the former senior management of Mengniu Dairy. It built its first farm in 2006 and started full scale operations in 2007. The company has a total production capacity of more than 150,000 tons of raw milk per year.

China’s dairy farming industry is fragmented and large scale farms are not as common as they are in other countries. The benefits of large firms include higher operating efficiency and more cost-effective collection of raw milk, helping reduce costs. The development of large dairy farms is in line with the government’s aims to standardise and modernise the country’s dairy industry, the firm said.

Last year, the dairy industry in China was hit by a scandal which involved 22 Chinese dairy firms that sold produce containing an industrial chemical called melamine. The chemical was allegedly added to milk in order to cheat nutrition tests. In January, the Chinese government said a total of 296,000 children had fallen ill following the consumption of milk tainted with melamine.