KKR invests $400m in Chinese chicken processor Sunner

The deal follows a spate of food safety scandals in China. Most recently, last month Shanghai Husi Food, a subsidiary of US meat supplier OSI Group, was accused by local authorities of selling expired meat to restaurant chains including McDonald's and KFC parent Yum Brands. Six employees of Husi Food have been detained as part of a government investigation.

Shenzhen-listed Fujian Sunner is China's largest breeder, processor and supplier of chicken products, providing fresh and frozen chicken for fast-food chains, including KFC, food manufacturers and meat wholesale markets. Through its vertically integrated facilities, Sunner claims to have complete supply chain oversight, ranging from chicken farming to the management of feed mills to processing.

"Vertically integrated chicken farming is a key solution to the food safety threats facing China's animal protein sector," said Julian Wolhardt, China regional leader at KKR, in a statement.

The company expects to leverage KKR's global resources and operational expertise to further strengthen its market share, and to meet the growing domestic demand for healthy chicken. Chicken is the fastest-growing protein source in China, but accounts for only about 17% of total meat consumption, compared to nearly 40% in Taiwan and Hong Kong. Large-scale farms supply 95% of chicken in the US, but only 30% in China.

"Partnering with companies that meet China's demand for increased food safety is one of our key focuses for China investments," said KKR's Greater China head David Liu.

Two months ago, KKR, Baring Private Equity Asia, Hopu Investments and Boyu Capital teamed up with COFCO Meat, a subsidiary of China's state-owned COFCO Group, to develop hog farms and meat processing plant. The PE investors are understood to have taken a 70% stake in the business for $270 million, with KKR accounting for the largest individual contribution at 50%.

In 2008, the PE firm partnered with CDH Investments to back China Modern Dairy and create a milk-producing outfit that operated to global standards. They made partial exits when the business listed in 2010 and when China Mengniu Dairy increased its stakes in 2013. KKR, CDH and Modern Dairy teamed up again last year to set up a greenfield farming joint venture.

The Sunner transaction is subject to shareholder and regulatory approvals.

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• Topics
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