Carlyle sees huge potential in Chinese dairy sector

Posted Sep 21st 2009 2:30PM by Tom Taulli
Filed under: China, Private Equity

Last year, a variety of Chinese dairy firms got embroiled in a major scandal. Some milk contained melamine, which resulted in the deaths of four infants. As a result, the Chinese government took swift action.

Now, it looks like the situation is getting much better. In fact, private equity firms are starting to invest in the sector.

The latest deal: The Carlyle Group has agreed to purchase a 17.3% equity stake in Yashili, which is one of the largest infant formula operators in China (the amount was not disclosed). The company got its start in the early 1980s.

No doubt, this is a big play on the massive growth opportunity in China. Plus, with outside capital, the the dairy industry can improve its infrastructure, productivity and most importantly, quality control. Keep in mind that the Carlyle partner on the deal, Patrick Siewert, was the former chief of Coca-Cola's (NYSE: KO) Asian operations.

Interestingly enough, back in June KKR agreed to invest in Ma Anshan Modern Farming, which is a large dairy farm. And, another deal came in August, in which Sequoia Capital invested $63 million in American Dairy, which is primarily focused on the Chinese market. Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: Carlyle Group, CarlyleGroup, inthenews, Patrick Siewert, PatrickSiewert, Yashihi