Bright Dairy & Food Co. (600597) agreed to sell a stake in a unit to RRJ Capital, a private-equity fund run by a former Goldman Sachs Group Inc. partner, to add farms as milk demand in China increases.
The board of Bright, China’s third-largest milk producer, approved a plan for RRJ to invest 1.53 billion yuan ($252 million) in an existing unit, the Shanghai-based company said yesterday. Bright rose as much as 4.8 percent, poised for the biggest gain since Jan. 8, in Shanghai trading.
RRJ Capital joins foreign investors such as Danone and KKR & Co. (KKR:US) in tapping demand in China where Euromonitor International estimates sales for drinking milk products will almost double to 259 billion yuan in 2016 from 139.5 billion yuan in 2010. The government is also seeking to strengthen the dairy industry and win back buyer’s confidence after a series of food-safety scandals have driven consumers to buy products from abroad.
RRJ Capital, run by former Goldman partner Richard Ong, will invest the money for a 45 percent stake in Shanghai Bright Holstan Co., a unit of Bright, according to a filing to the Shanghai stock exchange. The plan is pending approval from Bright’s shareholders and the Shanghai government, it said.
Bright, which sells liquid milk products such as UHT Milk and other dairy products including yogurt and milk powder in China, had 7.6 percent share of the milk market in 2012, trailing China Mengniu Dairy (2319) Co. and Inner Mongolia Yili Industrial Group Co., the latest Euromonitor data shows.
Bright gained 2.4 percent to 19.52 yuan as of 11:30 a.m. in Shanghai trading.
RRJ is an Asian investment firm founded in March 2011 focusing on private equity projects in China and Southeast Asia, according to the fund’s website. The fund is also run by Ong’s brother Charles, a former senior managing director of special projects at Temasek Holdings Pte., Singapore’s state-owned investment company.
Growing demand for dairy products in China has attracted foreign investors such as Danone, the world’s biggest yogurt maker. The Paris-based food company said yesterday it would pay 486 million euros ($662 million) to more than double its stake in China Mengniu Dairy, the nation’s largest milk producer.
In September, a company part-owned by KKR agreed to form a partnership with China Modern Dairy Holdings, China’s biggest raw milk producer, to build two dairy farms. The partners agreed to invest a combined $140 million in the next 18 months, they had said in separate statements at that time.
China raised requirements on areas including quality management, raw material, product formula and quality control for infant milk makers, the China Food and Drug Administration said on Dec. 24.
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