KKR buys 18% of chicken producer
Print Edition
PRIVATE equity giant KKR & Co has made its fourth food safety-linked investment in China, agreeing to buy 18 percent of chicken producer Fujian Sunner Development Co for US$400 million, the two companies said yesterday.
The deal comes as food safety scandals plague the country. US food maker Heinz apologized to Chinese consumers last week and said it would tighten controls over suppliers after it was forced to recall some infant cereal from store shelves due to excess levels of lead.
KKR’s investment, for new shares in the company, will be used to increase production at Fujian-based Sunner, which supplies KFC and McDonald’s, to provide safe chicken products through large-scale farms.
“Partnering with companies that meet China’s demand for increased food safety is one of our key focuses,” said David Liu, chief executive of KKR China operations.
Chicken is the fastest-growing protein source on China’s mainland, but is only 17 percent of total meat consumption, compared with nearly 40 percent in Taiwan and Hong Kong. Large-scale farms produce 95 percent of chicken in the US, but only 30 percent in China.
Buyout firms such as KKR, Carlyle Group and Olympus Capital have become regular investors in China’s food chain, employing Western technology and supply chain management to address the country’s food safety scares.
KFC parent Yum Brands Inc, McDonald’s Corp, Wal-Mart Stores Inc and Fonterra Co-operative Group Ltd have all suffered recently — and such incidents can seriously dent sales.
Retailers have even taken to offering insurance to customers who buy infant milk powder, showing the lengths to which companies will go to address concerns about food safety in China.
KKR earlier this year invested US$150 million in COFCO Meat, a subsidiary of China’s state-owned COFCO Group.
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