Investment craze for China's Dairy Farms

Want China Times, Staff Reporter 2014-07-05

A man milking a cow at a ranch owned by the Yili Group in Jiangsu,

July 8, 2010. (File photo/CFP)

There has been a recent investment craze for the dairy business in China, attracting the participation of several major enterprises, including internet giant Alibaba Group.

The Chinese-language Beijing News reported that an equity fund set up by Jack Ma, chairperson of Alibaba, and some other investors, will team up with an industrial investment fund under the auspices of CITI in securing a 60% stake, through subscription to cash capital increments, in a husbandry firm, a subsidiary of Yili Industrial Group in Inner Mongolia, at 2 billion yuan (US$322 million).

Yili reported that the fresh funds will help the husbandry subsidiary augment its capacity for fresh-milk supply by expanding and improving its dairy farm.

Hua Xia Dairy Farm, in Sanhe in Hebei province, has also received a fresh injection of funds totaling US$106 million from a consortium, organized jointly by the Government of Singapore Investment Corporation, Singapore's sovereign fund, and a private equity fund set up by Taishan Capital Corporation. Of the fresh fund, US$70 million will come from GIC, US$30 million from Taishan, and the remainder from other investors. Taishan will also chip in a total of US$108 million to Hua Xia, emerging as the largest shareholder.

This follows an investment in February of 1.5 billion yuan (US$242 million) by private equity fund RRJ Capital for a 45% stake in Shanghai Bright Holstan, a subsidiary of Bright Dairy and an announcement last September by private equity fund KKR that it was teaming up with CDH Investments and Modern Farming to invest US$140 million in two large-scale dairy farms in China.

"The huge potential of China's dairy market has attracted heavy investments from various parties, especially in dairy farms," remarked Shen Meng, an investment banker.