China Modern Dairy buys KKR, CDH $245m JV stake
KKR and CDH Investments have agreed to sell their stake in Success Dairy to China Modern Dairy Holdings (CMDH) in exchange for $HK1.9 billion ($245 million) of CMDH stock.
CMDH will issue 477 million shares to KKR and CDH as payment for the transaction. According to a regulatory filing, the price for the shares has been set at HK$4 each.
Once the deal has concluded, CMDH will own 100% of Success Dairy, with KKR and CDH fully exiting their stake in the venture. The agreement is expected to close by July 16.
Success Dairy is a joint venture formed by CMDH, KKR and CDH in 2013. The company runs two farms in Shandong province, with about 16,000 cattle between them. Operations of the farms include production, processing and sale of milk, along with breeding, raising and sale of dairy cattle.
When Success Dairy was established, KKR and CDH were also investors in CMDH, having together committed $202 million to the business in 2008. KKR exited most of its holding when CMDH listed in Hong Kong in 2013, and sold its remaining stake in the company to China Mengniu Dairy last year. CDH still holds a small stake in CMDH.
The firms invested in CMDH in the aftermath of one of China's worst food safety scandals as infant formula tainted with the chemical melamine caused six children to die and left hundreds more hospitalized. KKR saw an opportunity in creating a milk producing outfit that operated to global standards, to cater to consumers who had turned their back on domestic brands.
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