Private equity firm Kohlberg Kravis Roberts (KKR) plans to invest US$300 million in a startup dairy business in China, the South China Morning Post reported, citing market sources. The deal, which involves a US$100 million injection from KKR and US$200 million in debt financing, comes in the wake of a tainted milk scandal that has destroyed the credibility of China’s dairy industry. Twenty-two dairy firms were found to have sold products containing excessive levels of melamine, an industrial chemical that can be used to fool tests into reporting higher protein levels. The chemical was responsible for the death of four infants. KKR is said to be trying to build up what is currently a very small dairy farm. Guan Weikun, an official at the Dairy Association of China’s Guangdong branch, said that there may be opportunities for a foreign player bringing in a totally new brand, provided it had enough capital to develop a sales network.
For more on the commercial fallout from the dairy scandal, read this article from the November issue of CER.