Global private equity firm KKR has returned to China’s agriculture industry this week with a $400 million deal for a minority stake in Fujian Sunner Development, a vertically integrated chicken meat producer.
While it is only buying an 18 percent stake, KKR said in a statement it will take a strategic role and work closely with Sunner on the production of safe, high quality chicken products for Chinese consumers. The country’s consumers are increasingly concerned with food safety in the wake of various food contamination scandals in the country – most recently the sale of expired meats to fast food chains such as McDonalds and KFC.
Investing into companies that focus on producing traceable, safe food in China is one of KKR’s main focuses in the country, according to the statement.
“Partnering with companies that meet China’s demand for increased food safety is one of our key focuses for China investments,” David Liu, head of KKR Greater China, said in the statement. “Sunner is a market leader in China’s chicken farming industry. It has an experienced management team and meets the highest operating standards.”
Sunner’s structure – vertical integration of the full production chain from animal feed to processing – enables the firm to keep closer tabs on the end-product. “Vertically integrated chicken farming is a key solution to the food safety threats facing China’s animal protein sector,” KKR’s Julian Wolhardt said in a statement.
The firm presumably made the investment from its second Asia-dedicated private equity fund, which closed on $6 billion in July 2013.
KKR renewed its focus on China’s agriculture sector in June when it led a $270 million investment into COFCO Meat, the port and poultry subsidiary of Chinese state-owned food and agri conglomerate COFCO Group, alongside Baring Private Equity Asia, Hopu Investments and Boyu Capital. KKR is also a stakeholder in China Modern Dairy Holdings, China’s largest raw-milk producer.
The firm has also made a push into the agriculture sector in other emerging markets recently such as Africa, where it invested $200 million into Afriflora, an Ethiopia-based rose grower and distributor in June.
KKR declined to comment.