Chinese milk supplier Modern Dairy is to team up with investors KKR and CDH to build two dairy farms in the country.

KKR and CDH, shareholders in Modern Dairy since 2008, and the raw milk firm plan to spend US$140m over the next 18 months on two “large-scale dairy farms” in China.

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Modern Dairy predominantly sells raw milk to branded dairy companies for processing into consumer products. The three companies said the new venture will “deliver premium raw milk to Chinese consumers”.

Modern Dairy CEO Gao Lina said: “The growing demand for premium dairy products is driving strong demand for high quality milk from large scale farms. Following our successful partnership in Modern Dairy, we have chosen once again to partner with KKR and CDH in a new venture to help meet Chinese demand for safe and high quality milk.”

Each farm will house 10,000 cows and both will be located in Shanghe county in China’s eastern Shandong province.

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David Liu, head of KKR China said: “The management of Modern Dairy saw a need arising from increasing demand for safer and healthier milk. The solution was large-scale dairy farm that incorporated global best practices. Today, food safety remains a top priority and this new investment helps increase the supply of premium raw milk in China.”

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KKR will hold 61.5% of the new farming venture, with CDH taking 20.5% and Modern Dairy 18%. The terms of the deal mean Modern Dairy could buy back the farms in three years.

KKR and CDH first invested in Modern Dairy five years ago. In May, they sold off the bulk of their shares to Chinese dairy giant Mengniu.

A KKR spokesperson declined to comment on the new venture and also said the other parties would refuse to discuss the new agreement. Officials at Modern and CDH did not return a request for comment.