Modern Dairy, PEs to build JV farms in China

China Modern Dairy Holdings Ltd. and two private equity firms announced on Tuesday they would team up to build two large-scale raw milk dairy farms in east China's Shandong Province.

KKR & Co. LP, CDH Investments and Modern Dairy will jointly invest 140 million U.S. dollars in the joint venture over the next 18 months to build the two farms.

According to the agreement, the New York-based KKR holds 61.5 percent of the venture, while Chinese investment firm CDH and Modern Dairy own 20.5 percent and 18 percent, respectively.

The two dairy farms, each planned with a capacity to raise 10,000 cows, will be located in Shanghe County in the northwest of Shandong.

The joint venture comes at a time when the Chinese government is looking to nurture healthy development of the domestic dairy sector to deliver safe and high-quality milk after a series of milk contamination scandals set back consumers' confidence.

KKR and CDH invested in Modern Dairy in 2008. Since then, the company has developed 22 dairy farms with 180,000 cows. It listed on the Hong Kong Stock Exchange in 2010.

The deal is still subject to regulatory approval.