Recent investments by private equity behemoth Kohlberg Kravis Roberts (KKR) will help restore confidence in the long-term prospects of the China's dairy industry, which has suffered severely from last September's the tainted milk scandal.

KKR has announced the final completion of a series of investments in Ma Anshan Modern Farming ("Modern Dairy") that have an estimated total value of US$150m. A Paul, Weiss team led by corporate partner Jack Lange represented KKR in connection with this investment.

Private equity investors have been investing in the dairy industry for many years. Back in 2002, Morgan Stanley, CDH Fund and China Capital Partners jointly invested in Mengniu Dairy, now the country's largest liquid milk producer. Other PE funds that have invested in this industry include ARC Capital, Actis, Warburg Pincus, and CITIC Capital.

KKR's investment is, however, the first foreign investment in the dairy industry since last September and marks a shift in focus from downstream diary processors to upstream raw milk suppliers. Capital investments similar to this one are likely to be encouraged, as they help the overall dairy industry address many of the challenges it faces, including product safety, milk quality, operational efficiency, disease control and environmental protection.