* KKR's investment follows earlier deals in pork and dairy
* Capital will expand production and build large scale farms
* Food safety a key investment theme for KKR -exec
By Stephen Aldred
HONG KONG, Aug 26 Private equity giant KKR & Co
LP has made its fourth food safety-linked investment in
China, agreeing to buy 18 percent of chicken producer Fujian
Sunner Development Co Ltd for $400 million, the two
firms said on Tuesday.
The deal comes as food safety scandals plague the country.
U.S. food maker Heinz apologised 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, CEO of KKR Greater China.
Chicken is the fastest-growing protein source in China, but
is only 17 percent of total meat consumption, compared to nearly
40 percent in Taiwan and Hong Kong. Large-scale farms produce 95
percent of chicken in the United States, but only 30 percent in
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
KKR earlier this year invested $150 million in COFCO Meat, a
subsidiary of China's state-owned COFCO Group. The firm
previously invested in China's food supply chain, through milk
producer China Modern Dairy Holdings Ltd.
(Reporting by Stephen Aldred; additional reporting by Twinnie
Siu in HONG KONG and Lee Chyen Yee in SINGAPORE; editing by