RRJ to invest $250m in Shanghai Bright Dairy JV
RRJ Capital plans to invest RMB1.5 billion ($250 million) for a 45% stake a dairy farming joint venture with Shanghai-listed Bright Dairy & Food, a subsidiary of Chinese conglomerate Bright Food Group.
According to a regulatory filing, Bright Dairy will restructure all its existing dairy farming and related businesses into the joint venture - Shanghai Bright Holstan. Bright Dairy, which operates four dairy farms in China, will hold the remaining interests of 55% in the joint venture.
The capital raised will be also used to build new dairy farms in addition to maintaining operations at existing facilities.
The deal, which still requires regulatory approval, is the latest in a string of private equity investments in China's dairy sector. The thesis is that Chinese consumers, driven by rising disposable incomes and low confidence in food safety, are willing to pay a premium for quality products.
Two investments announced within the last six months are dairy farming joint ventures along the lines of the RRJ-Bright Dairy arrangement.
In October, Affinity Equity Partners invested $123 million in partnership with Beijing Capital Agribusiness Group - also known as Sunlon - a food conglomerate created by the Beijing government. This was preceded by KKR and CDH Investments teaming up with China Modern Dairy to created a $140 million greenfield farming joint venture that will deliver premium raw milk to domestic consumers.
KKR and CDH have also been investors in Modern Dairy since 2008 and made partial exits earlier in 2013 when China Mengniu Dairy - Modern Dairy's long-standing off-take partner - increased its stake in the business.
Last year Mengniu also acquired a majority interest in domestic rival Yashili International, which included purchasing a 24% stake held by The Carlyle Group for about HK$3 billion ($387 million).
RRJ, which was set up Richard Ong, formerly of Goldman Sachs and Hopu Investments, reached a final close of around $3.5 billion on its second fund last year. Recent investments include paying $349 million for a 7.85% stake in China Everbright International, a subsidiary of China Everbright Holdings.
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