Private equity moves on Cofco unit in US$270 m deal

A consortium of four private-equity firms has agreed to pay about US$270 million for a majority stake in a meat unit of China's largest grain trader Cofco, tapping the growing demand for quality food supply on the mainland after a series of food scandals.

The investment, led by KKR and Baring Private Equity Asia (BPEA), follows a US$4.7 billion acquisition of pork producer Smithfield Foods by China's Shuanghui International last year.

For KKR, which invested about US$150 million in the meat unit, this marks the first investment in China's pork industry after a number of successful deals in China's food industry, according to a person familiar with the deal.

The transaction comes after the United States private equity giant bought holdings in Ma Anshan Modern Farming and Asia Dairy.

Beijing has pledged to enhance food quality following a series of scandals linked to melamine-laced baby formula and rat meat sold as mutton.

Cofco Meat, one of the largest hog producers in China, has large-scale operations that help "to produce high-quality meat products to address increasing food safety issues", according to the statement. It did not specify the size of the stake bought by KKR and its fellow investors.

The expansion in China's pig production is putting more demand for oversight on the industry as demand for meat surges. The country accounts for more than 50 per cent of global pork consumption, according to yesterday's statement.