RRJ milks China’s Bright Dairy

The proposed $252m investment will be the latest foray by private equity into China’s dairy sector.

Hong Kong-based RRJ Capital has signed an agreement to invest RMB 1.5 bilion (€285 million; $252 million) in a joint venture with Shanghai-listed Bright Dairy & Food, according to a disclosure to the Shanghai Stock Exchange.

The deal is now subject to approval by the Shanghai Municipal State-owned Assets Supervision and Administration Commission and the Shanghai Municipal Commission of Commerce.

If approved, Bright Dairy will hold 55 percent, while RRJ will hold the remaining 45 percent of the joint venture, dubbed Bright Holstan. The firms plan to integrate all dairy farms owned by Bright Dairy & Food, build a new dairy farm and invest in ranch management-related businesses.

RRJ did not respond to requests for comment.

The Bright & Dairy deal is the most recent investment by private equity into China’s milk sector, which has been the subject of much controversy in recent years.

Dairy-related businesses attracted GPs after company valuations plummeted following the July 2008 tainted milk scandal, which caused the death of six infants and made a further 294,000 Chinese become ill.

Since then, Kohlberg Kravis Roberts, CDH Investments, Morgan Stanley Private Equity, Affinity Equity Partners and Hopu Investments are among the firms that have invested in China's dairy industry. A key part of the operational work is ensuring food safety standards are at an international level.

In June last year, The Carlyle Group secured an exit from its own investment in Chinese milk producer Yashili International, Private Equity International reported earlier.

Carlyle and controlling shareholder Zhang International Investment sold Yashili to China Mengniu Dairy in a HK$12.5 billion (€1.2 billion; $1.6 billion) deal. In November, Temasek Holdings and Hopu then made a $213 million joint investment into Yashili.

RRJ Capital is a Greater China and Southeast Asia-focused fund that can make related investments outside these regions. The firm raised $3.5 billion for its second private equity fund, which closed in February last year, media reported earlier. 

The firm was formed in 2011 when co-founder and co-chairman, Richard Ong, formerly head of Asia investment banking at Goldman Sachs, spun out of his private equity firm Hopu Investment Management. His brother Charles Ong, who had previously spent 10 years at Singaporean sovereign wealth fund Temasek Holdings, is RRJ's co-founder and co-chairman.