RRJ Capital Injects $250M In Joint Venture With Shanghai Bright Dairy

Shanghai-based Bright Dairy & Food Co., Ltd. and Hong Kong-based Asian private equity firm RRJ Capital has signed an agreement, in which RRJ Capital will invest RMB1.525 billion ($250 million) in Bright Dairy’s subsidiary Shanghai Bright Holstan Co., according to a company announcement.

The investment will be made in U.S. dollar and in cash. After the completion of the deal, Shanghai Bright Holstan will become a Sino-foreign joint venture company. Bright Dairy will hold 55% of the joint venture, while RRJ Capital will hold the remaining 45%.

The companies say that they will use the investment on constructing new dairy farms and improve its existing dairy operations.

Before the RRJ Capital investment, Bright Dairy held 80% of Shanghai Bright Holstan. Bright Dairy acquired the remaining 20% from a minority shareholder, Bright Food Group.

Bright Dairy then integrated all of its existing and constructing dairy farms, as well as all related operations into the Shanghai Bright Holstan platform.

Private equity firms have been very active in China’s dairy industry lately. Last November, Hong Kong-listed Chinese dairy firm Yashili International Holdings Ltd. says that Temasek Holdings, Hopu Investment Management Co. and three private investors will buy a 13.24% stake of the company from China Mengniu Dairy for HK$1.6 billion ($213 million).

In another deal, Affinity Equity Partners is said to invest US$123 million into a joint venture with Beijing Capital Agribusiness Group to focus on growing its dairy farming business.

Last September, Kohlberg Kravis Roberts & Co. and CDH Investments formed a joint venture with Modern Dairy to build two large-scale dairy farms in China.

The Chinese dairy sector has already provided profitable returns for some private equity firms. Last May, KKR and CDH Investments agree to sell their stakes in China Modern Dairy to China Mengniu Dairy in a potentially profitable partial exit.

According to Euromonitor, China’s total dairy consumption grew at 10% compound annual growth rate over the past five years, with premium dairy product consumption growing significantly faster than the overall market. Premium dairy product consumption’s market share also expanded from 10% to 19%.

Despite the strong growth, China’s per capita liquid milk consumption is less than 10kg per year, compared to 32kg in Japan and 78kg in the United States.

RRJ currently manages US$6 billion across two private equity funds focused on China and South-East Asia.

The firm is founded by Richard Ong, former founder and CEO of Hopu Fund. Before that, Ong spent 15 years with Goldman Sachs with the latest position as co-head of Asia Ex Japan investment banking.

The firm’s co-CEO is Charles Ong, formerly with Temasek Holdings holding positions including chief investment officer and chief strategy officer.

China Expert network