The China Mengniu Dairy Co. Ltd has recently entered into an agreement to purchase US$410 million shareholdings in the largest unpasteurized milk producer in China. This is a strategic move to rebuild the trust in the company after a number of scandals had tainted the reputation of the company.

The company was twice accused of selling tainted milk and now after being cleared of charges, is purchasing 26.92% of China Modern Dairy Holdings Ltd. The original owners  of the shares were private equity firms KKR & Co LP and CDH Investments LP. WIth the purchase, the shareholdings of Mengniu in China Modern would increase to nearly 28%.

The move is to ensure control over milk supplies and win consumer confidence in the market that is booming at 20% per year. Currently, Mengniu ranks first in China in terms of sales volume for milk and milk related products.

As for KKR, the deal is another windfall for the hedge fund from its investment binge back in 2007. After the 2010 Modern Dailry IPO back in 2010 as wll as the current deal, KKR would have earned triple from its original investment.