July 14, 2011

The owner of German dairy group Müller has teamed up with private-equity firm Olympus Capital Holdings to buy a stake in Chinese milk producer Huaxia Dairy.

Theo Müller's private-equity investment vehicle Müller Milch Management is part of an investment group that has paid US$45 million for a "significant minority stake" in Huaxia.

Olympus Capital plans to contribute US$30 million and Müller Milch will spend US$10 million. Previous investors will invest the remaining US$5 million. The proceeds will be used by Huaxia to fund capital expenditures and pursue expansion opportunities.

Dr. Bernd Pfister, Müller Milch Management's MD, said: "China represents one of the most exciting dairy opportunities in the world. We are proud to be part of it. High-quality dairy products are our ambition and Huaxia Dairy is the best company we have found in this space."

Huaxia was set up in 2004 and supplies to "major" dairy companies in China, Olympus Capital said. The firm also produces the Wondermilk and Wonderyoghurt brands.

Olympus Capital Shanghai executive director Nan Shao said the private-equity firm plans to help Huaxia replicate the "successful model" developed at the dairy firm's large-scale farm near Beijing with additional farms to "increase overall milk supply and further capitalise on the growth in this sector".

Huaxia chairman Charles Shao explained that the investment would allow the company to invest in technology to boost productivity.

He added: "As a strong regional player, we will continue to focus on the Beijing and Tianjin markets for now, as well as on the upstream supply of raw milk, since that is a space where Huaxia Dairy has real differentiation, in terms of technology, systems and the strong industry relationships we have cultivated since inception."