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Hansong Zhu, who runs Goldman Sachs’s natural resources division for Asia-Pacific with the Melbourne-based rainmaker Richard Phillips, also flagged that China might selectively use the falls in commodity prices to its advantage and snap up assets on the cheap.
China eyes infrastructure deals
THE AUSTRALIAN OCTOBER 07, 2014 12:00AM
Michael Bennet
Reporter
Sydney
Cross border deals
Cross border deals Source: TheAustralian
CHINA is set to be a major player in state government privatisation sale processes as the booming nation eyes stable infrastructure assets delivering returns that outpace those on offer in other nations.
Hansong Zhu, who runs Goldman Sachs’s natural resources division for Asia-Pacific with the Melbourne-based rainmaker Richard Phillips, also flagged that China might selectively use the falls in commodity prices to its advantage and snap up assets on the cheap.
Morgan Stanley’s head of investment banking in Australia, Richard Wagner, last month told The Australian it was “nearing that point in the cycle” when China would pounce on buying opportunities. Ahead of state elections in Victoria, NSW and Queensland next year, Mr Zhu said China was increasingly seeking infrastructure assets generating long-term returns and Australia was a “very attractive” place to deploy capital.
In the past year, Chinese state-owned company State Grid bought 19 per cent of electricity supplier SP AusNet and 60 per cent of energy infrastructure company SPI Australia, while China Merchants Group joined forces with Hastings Funds Management to buy Port of Newcastle.
Infrastructure has dominated the Australian mergers and acquisitions market, helping push announced deal flow up 55 per cent in the first nine months of the year compared with last year, according to Thomson Reuters.
Mr Zhu said the “serious issue” of overcapacity in many industries in China weighed on opportunities to deploy capital in the Asian nation.
“Definitely it will attract interest from the Chinese,” Mr Zhu said of the potential raft of government assets coming to market, such as ports and electricity poles and wires.
“If you compare the infrastructure opportunities in China like transmission distribution grids, actually Australia would provide a better return for the investment.”
Despite waving several foreign investments through, the federal government’s blocking of Archer Daniels Midland’s $3.4 billion takeover of GrainCorp soon after taking office created uncertainty for offshore buyers.
West Australian Premier Colin Barnett has claimed Clive Palmer’s public legal battles with Hong Kong’s Citic Pacific have damaged the relationship with China.
Debate has also raged about China’s role in Australia’s soaring residential property prices, an issue being explored in a federal inquiry.
Mr Zhu said Chinese investors were aware of Mr Palmer’s spat with Citic, but mostly viewed it as a one-off rather than highlighting a “big risk”.
Mr Phillips added there was greater “stability” in the government’s position.
“Overall, I think compared to other mature markets, the Chinese still feel Australia is a relatively friendly hosting country to accept Chinese inbound investment,” said Mr Zhu.
He said Chinese investors had learned from prior investments that developing greenfield projects was difficult, and they were “more and more interested” in mines nearing production or already pumping out resources.
Baosteel teaming up with Queensland-based Aurizon for the $1bn purchase of West Australian miner Aquilla Resources also showed China’s increasing desire for local partners.
Mr Phillips said despite the dour mood in the mining sector in recent months as the iron ore price fell to $US80 a tonne, China’s interest in some assets and commodities had increased. “There is a fundamental strategic need for those underlying assets and in some ways they become more attractive, particularly as the Aussie dollar weakens,” he said.
“I think coal and iron ore will continue to be really interesting areas … and we’ll continue to see things happen in that space.”
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HSBC says China buyers hunting Australian infrastructure assets
Date
July 8, 2015 - 2:45PM
Perry Williams
Senior Reporter
Several of China's largest state-run infrastructure groups will bid for a string of port and utility deals in Australia by year-end, reflecting the shift away from deals in the iron ore and coal sectors.
Banking giant HSBC has arranged funding for two of the largest inbound Chinese investments into Australia, in the past year: China Merchants Group, which teamed up with Hastings Funds Management in a $1.75 billion deal to secure a 98-year lease on the Port of Newcastle last year, and more recently China Communications Construction Company for its $1 billion acquisition of former Leighton subsidiary John Holland.
With China Merchants tipped as a possible consortium partner or even rival bidder for $9 billion ports and rail takeover target Asciano, HSBC said there will be strong interest in Australian engineering and infrastructure deals, given the quality of assets being touted for sale.
Assets for sale in the next six months are expected to include the NSW government's $20 billion lease of its electricity poles and wires, as well as LNG gas pipelines from Origin Energy and Santos.
Assets for sale in the next six months are expected to include the NSW government's $20 billion lease of its electricity poles and wires, as well as LNG gas pipelines from Origin Energy and Santos. Photo: Quentin Jones
"China has got an enormous amount of sovereign wealth and it is looking to deploy that money into high quality assets into Australia," said Todd Langsford, HSBC's head of leveraged acquisition finance, in an interview with Fairfax Media.
The bank said there has been a strategic shift within China from mining and resources deals to infrastructure assets, reflecting a move in its economy away from heavy industry into transport, logistics and engineering with a long-term investment focus.
"When you talk to the senior folk in those firms, it's not just a pure investment thesis," said Lyndon Hsu, HSBC's Asia Pacific head of leveraged acquisition finance. "In fact the returns these investors are making you could not describe as being short term, high level returns. They are actually more longer term based returns."
While long-term supplies of Australian iron ore and coal remain critical for China, deals are unlikely to be so closely tied to the mine gate, according to Mr Hsu who points to China Merchants and Hastings' preference for long dated, reliable returns from the Port of Newcastle.
"Clearly China Merchants were attracted to the infrastructure asset and they like the long-term returns associated with that type of investment," said Mr Langsford.
Assets up for sale in the next six months are expected to include the NSW Government's $20 billion lease of its electricity poles and wires; Origin Energy's APLNG gas pipeline in Queensland for up to $6 billion and Santos' GLNG pipeline, which could fetch a similar sum.
BG Group struck a $US5 billion ($6.75 billion) deal in December to sell its QCLNG gas pipeline to APA Group as part of a tender that also drew a bid from the $US200 billion sovereign wealth fund, China Investment Corporation.
Mr Langsford said Chinese companies will look at both the APLNG and GLNG deals.
"The pipeline asset that sold at the back end of last year – QCLNG – went to APA but there was clearly China sovereign wealth investors who were lined up in bidding consortiums and bidding for that asset," said Mr Langsford. "There will be other pipelines in Queensland later this year that we expect they will bid for in addition to NSW electricity poles and wires assets."
Overpayment reputation
Some Chinese companies gained a reputation during the peak of the mining boom for overpaying on assets. While most of the big-bang deals fell away as the climate for Australian mining moved into cost-cutting mode following a slump in the price of commodities, the Port of Newcastle price tag last year stunned many investors.
The NSW Government expected to reap around $1 billion for the port, but the final price came in at $1.75 billion, representing a multiple of 27 times earnings. That followed a $5.2 billion price tag for the Port Botany and Port Kembla assets sold by the NSW Government, raising questions over whether an IFM-led consortium had overpaid for its port assets.
However, Mr Hsu said Chinese investors' reputation of overpaying for assets no longer held true.
"They are relatively disciplined," said Mr Hsu. "They are often winning those assets so they are paying the highest price but they doesn't mean they are overpaying."
Mr Langsford also emphasised that Chinese investors were increasingly looking beyond price and focusing on how China could take the lessons and expertise from its infrastructure investments in Australia and put them to use in China.
"The ability to take the technology and know how from these high-end value assets and importing that technology and know-how back to China and effectively using those technologies to improve whatever standards are required in China is important," said Mr Langsford.
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Chinese government circles as Rio Tinto joins $18bn auction
THE AUSTRALIAN JULY 15, 2015 12:00AM
Bridget Carter
Mergers & Acquisitions Editor
Sydney
Gretchen Friemann
Mergers & Acquisitions Editor
Sydney
The Chinese government and the nation’s private investment heavyweight are positioning themselves to secure a grip on more than $18 billion worth of Australia’s most prized assets, with Rio Tinto’s coalmines believed to be the latest that have caught the eye of buyers from the Asian super power.
It comes as the state-owned China Investment Corporation and its bidding partner, LaSalle Investment Management, were firming last night as the most likely winners of the contest to buy Morgan Stanley’s $8.9bn Investa Property Group platform.
The process, run by investment banks Morgan Stanley and UBS, was expected to reach a critical point this week, with one or two of the five bidders that went through to the second round expected to be selected to embark on exclusive negotiations with the prominent office landlord.
Investa directly owns office towers that have a face value of $1.9bn but may fetch close to $2.4bn, implying a net yield of between 5 per cent and 6 per cent.
The management platform is said to be worth about $180m.
The Citi-advised CIC and LaSalle consortium began emerging as the favoured candidate to win last week, as flagged by DataRoom, after five bidding groups were originally short-listed.
But while participation from the Chinese has intensified competition in the real estate arena, they also remain a legitimate force for deal-makers in mining and infrastructure.
State Grid and China southern, the country’s two largest state-owned power companies, are expected to bid strongly as part of consortiums for the NSW government’s $6bn electricity network, for which expressions of interest were due yesterday.
Sources say competition is also likely to come from buyers out of China for Rio Tinto’s $4bn-odd portfolio of coal assets in NSW, despite Glencore and X2 currently weighing a potential purchase.
Fosun, the country’s largest privately owned conglomerate, recently weighed up a potential investment in Fortescue Metals’ Chichester Hub, a move that could have offered some relief to the miner from its hefty debt pile.
Like X2 and Glencore, Fosun’s interest will be to capitalise on the low point in the cycle due to weakness in the coal price, as Rio continues to narrow its focus to iron ore, suggesting that it may emerge as a third contender.
Rio has made previous attempts to sell coal assets in the state before, and it recently tried to sell its Pacific Aluminium operations through adviser Credit Suisse. Fosun is also being called on by other Chinese-owned mining companies to offer support as a co-investor, according to sources.
Other Australian miners struggling to repay loans are also believed to be on the radar of the Chinese.
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CIC International buys Investa property for $2.5 billion
THE AUSTRALIAN JULY 27, 2015 7:27PM
Greg Brown
Property Reporter
Sydney
Chinese sovereign wealth fund CIC has outlaid almost $2.5 billion for a portfolio of office tower assets being sold by the Investa Property Group in Australia’s largest ever direct office sale.
The owner of the $8.9 billion Investa platform, Morgan Stanley Real Estate Investing, announced that it has sold the property it owned through Investa.
The Australian’s DataRoom first foreshadowed the likely deal earlier this month.
The next step in the Investa sales process, being managed by investment banks UBS and Morgan Stanley, will be for the control of the Investa platform’s management rights, that are being contested by LaSalle Investment Management and Mirvac Group.
On the property front, CIC has in one swoop become a major investor in the Australian office market, buying stakes in nine buildings across Sydney, Melbourne and Brisbane
The group has a quarter stake in the trophy asset, 126 Philip Street, which is the Australian headquarters of Deutsche Bank, and regarded as one of Sydney’s finest towers.
Other Sydney towers in the portfolio include a quarter stake Grosvenor Place, which is occupied by accounting firm Deloitte, and a half stake in Telstra’s Sydney headquarters at 400 George Street.
Another Sydney CBD building is 255 Elizabeth Street, to be occupied by education firm Navitas from 2016, while a North Sydney office building at 80 Pacific Highway is also part of the portfolio.
In Melbourne, CIC will have a half stake in 120 Collins Street, which houses a range of blue chip tenants, including Rio Tinto, Merrill Lynch, Morgan Stanley and Citigroup.
The portfolio also included one Brisbane building, at 410 Ann Street
Morgan Stanley took over the then ASX listed Investa Property Group at the top of the market in 2007.
The Investa team sold a significant portion of the original portfolio into the funds it manages, the listed Investa Office Fund and the wholesale Investa Commercial Property Fund.
During the sales process, Morgan Stanley agreed to sell more than $300 million worth of office buildings and development sites to ICPF.
This included the landmark development site at 60 Martin Place, as well as shares in 126 Phillip Street, 1 Market Street and 33 Bligh Street.
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Jul 31 2015 at 5:12 PM Updated Jul 31 2015 at 5:52 PM
How Beijing bought Australia's biggest property offer
The Sir Norman Foster-designed Deutsche Bank Place, one of the iconic properties held by Morgan Stanley Real Estate Fund VI through the Investa Property Group. Peter Rae
by Robert Harley
In mid-July, the four man property team from the sovereign wealth fund, China Investment Corporation, led by director Cai Zhiwei, were ushered into one of the meeting rooms in the Sydney headquarters of UBS.
Directly across the Hunter Street, and filling the view, was the Sir Norman Foster-designed Deutsche Bank Place, one of the iconic properties held by Morgan Stanley Real Estate Fund VI (MSREF VI) through the Investa Property Group.
Within the month CIC had bought the property, and eight other towers, for a record-breaking $2.45 billion. It is the highest price yet paid for a direct portfolio of Australian properties, and the pricing, at 20 per cent above a December valuation, will sharpen prime values around the country.
As a private equity player MSREF VI was always going to exit Investa and the sale kicked off in February. The offering included the office towers plus a highly regarded operating platform that manages the towers, an institutional fund, and the listed Investa Office Fund – $9 billion worth of property all up. MSREF VI is also selling a stake in the listed fund and a land development business.
Heading the team was Chris Tynan, the local managing director of Morgan Stanley Real Estate Investing who had joined the group straight from university in 2003. Investa's top executives, Campbell Hanan and Jonathan Callaghan, added to the deal team. Major decisions went to Tokyo and New York.
The bankers were led by Tim Church, the managing director and head of real estate Australasia for UBS, and Morgan Stanley's Daniel Scamps.
Their first move was to approach 100 selected buyers. Fifty checked out the data room and 20 made bids by April 21.
"We have been involved in a lot of sell-side transactions and we have never seen such interest," Church says.
Three factors drove the demand. The first was the scale. Rather than being daunted by the big numbers, global investors don't want to be bothered unless they can "deploy significant capital". The second was the quality of the portfolio. Sixty per cent of the value was in four "landmark assets in gateway cities" – 126 Phillip Street, 400 George Street and Grosvenor Place in Sydney and 120 Collins Street in Melbourne.
The third was the fall in the $A. "For a buyer using US dollars this portfolio would have cost $US2.75 billion in 2011. Today it is $US1.8 billion. In US dollars it is almost $US1 billion cheaper," Church says.
THE SHORT-LIST
Five bidders were short-listed. Global giants Blackstone, Brookfield and CIC, and two locals backed by global partners, the DEXUS Property Group with the Abu Dhabi Investment Authority and the Cromwell Property Group backed by the South African Redefine.
Four second-round bids came in. Brookfield, perhaps distracted by its interest in Asciano, chose not to proceed. Church says the bids were so close "you could have put a handkerchief over them".
CIC was in the lead, perhaps $50 million ahead of DEXUS. But there was a bigger difference. CIC was prepared to have Investa manage the assets. DEXUS and ADIA were not.
For Morgan Stanley that simplified the process. The group always had to sell both the hard assets and the business platform. CIC's willingness to have Investa manage the assets gave Morgan Stanley a $9 billion platform to sell in the second stage of the sale. With the MSREF VI stakes in the funds, the second stage is now worth over $400 million.
Local real estate investment trust Mirvac and the global property funds management giant LaSalle are vying for the business.
The lawyers were ready, Allens partners Vijay Cugati and Mark Stubbings, acting for Morgan Stanley and Clayton Utz partners David Wilkie and Kylie de Oliveira for CIC.
CIC does not have a banker. It is "self-advised" with, in this case, Colliers International providing some valuation advice. But it's a pretty powerful team. This year alone it has bought $7 billion worth of property including malls in France and Belgium and an office park in London.
So the call went into Cai Zhiwei. CIC was well positioned on price, and contract, he was told, but the team should be in Sydney to finalise the deal. The four were on the next plane from Beijing.
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Chinese buy nation’s largest dairy, Van Diemen’s Land Company
Sue Neales
[Image: sue_neales.png]
Reporter - Rural/Regional Affairs
[Image: 733307-8f60052e-70d5-11e5-ba96-95f70c84c9e6.jpg]
A Van Diemen's Land Company farm at Woolnorth in Tasmania. Picture: Peter Mathew Source: Supplied
[b]Australia’s largest and oldest dairy farm has been effectively sold for $220 million to Chinese owners. Herman Shao-ming Hu and Kenny Zhang are finalising the purchase of a majority interest in the 190-year-old Van Diemen’s Land Company (VDL) in Tasmania.[/b]
The near-completed deal comes in the same week as federal parliament prepares to debate the Chinese-Australia free-trade agreement, and will be a test of Treasurer Scott Morrison’s attitude to foreign investment.
Mr Hu and Mr Zhang through their respective companies, Ryoden Development and the Australia-registered Waratah Corporation, will each buy about 35 per cent of VDL from current owner New Zealand’s New Plymouth Council.
The other third of Australia’s biggest single milk producer is set to be bought by the Lempriere Capital equity managers, linked to the Melbourne-based Lempriere family, noted wool traders.
The deal is one of Australia’s biggest agricultural sales to foreign investors and will require approval by the Foreign Investment Review Board as it is significantly larger than the new $15m approval threshold set earlier this year.
In 2012, the Lempriere group also organised the sale of Australia’s largest cotton farm and irrigation water holder, Cubbie Station, to another Chinese company, Shandong Ruyi, for $240m, retaining a 20 per cent stake for itself.
Hong Kong-based Mr Hu and former Howard government communications minister Richard Alston, chairman of Waratah Corporation, visited Tasmania last week to inspect the 25 dairy farms owned by VDL.
They met Premier Will Hodgman and State Growth and Energy Minister Matthew Groom.
Neither Mr Hu, who is a deputy of China’s National People’s Congress and chairman of Hong Kong’s City University, or Australian-educated mainland Chinese property developer and coal billionaire Kenny Zhang, have any previous agricultural interests.
But both Chinese companies have access to distribution and marketing channels in China and Hong Kong, where any food and farm products they produce in Australia can be sold directly.
VDL’s new Chinese owners plan to further expand and develop its farms and associated infrastructure to focus on China’s growing demand for infant baby formula and milk-based health drinks for its ageing population.
There are also suggestions the company may build its own milk powder plant to enable all its milk production, processing and distribution systems to remain within its own networks.
One of the key reasons for Mr Hu and Mr Zhang’s interest in VDL is understood to be the location of its dairy farms and the 19,000ha of land it owns in remote Tasmania.
They believe foods grown and produced from Tasmania, and potentially marketed under a special new brand highlighting VDL’s centrepiece station Woolnorth as the location of the world’s cleanest air and water at Cape Grim, will sell particularly well in China.
VDL runs a massive herd of 29,000 dairy cattle on a combined 19,000ha of fertile farmland in northern Tasmanian.
Its 18,000 milking cows, most located on Woolnorth station on the state’s isolated northwest tip, as well as 12 other farms, produce more than 100 million litres of milk a year, making the VDL company Australia’s largest single milk supplier.
The Bureau of Meteorology also has an air-testing station at Cape Grim, while VDL’s Woolnorth farm is already home to 62 wind turbines, majority-owned by another Chinese company, the Shenhua Energy Group
Mr Zheng, managing director of Waratah Corporation which started life as his first business Waratah Paint, earlier this year flagged his move out of investment in the slowing mining and resources sector into agribusiness in Australia and New Zealand.
“With the domestic food safety problem becoming more and more serious, most Chinese are paying more attention to safety and healthy food,” Mr Zheng wrote in a recent message on his company website.
The Tasmanian government, which did not respond to requests for comment yesterday, is understood to be thrilled by the Chinese interest — and much-needed foreign capital — into Australia’s smallest and poorest state and its booming dairy industry.
There are also hopes other Chinese investors may now invest in Tasmania’s ageing container port at Launceston or at Burnie — as well as in direct shipping services between Tasmania and China.
None of the companies involved in the sale would comment yesterday.
The company has been informally on the market for the past three years, with potential Chinese investors always prominent in talks.
Sources told The Australian that, while formal purchase papers had not been signed, contracts were well advanced and would proceed to signing ahead of FIRB approval within days.
Lempriere Capital’s purchase of one-third of Tasmania’s biggest dairy operation marks a nostalgic return to its roots.
Its heritage goes back to 1823, when Tasmanian woolgrower and trader Thomas Lempriere founded the Bank of Van Diemen’s Land, Australia’s second bank.
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China’s Landbridge secures Port of Darwin in $506m deal
Andrew White
[Image: andrew_white.png]
Associate Editor
Sydney
[Image: 789540-cf231a30-716f-11e5-87c5-82c509632f8f.jpg]
A tug escorts an LNG tanker out of Darwin. Source: News Corp Australia
[b]The Port of Darwin has been sold to Chinese petrochemicals and port operator Landbridge Group for $506 million, beating bids from Port of Brisbane and Colonial First State for one of the last available and fastest growing trade gateways in the country.[/b]
Northern Territory Chief Minister Adam Giles said Landbridge will operate Darwin Port land and facilities at East Arm Wharf (including the Darwin Marine Supply Base) and Fort Hill Wharf for 99 years in a deal that will see the state retain a 20 per cent stake and a separate entitlement to revenue growth above pre-agreed levels.
The deal also delivers a significant upgrade of facilities, with the privately-owned Chinese group, based in Shandong province, committing $35 million over the next five years to growth projects including container handling and refrigerated storage for beef exports, and $200 million over the next 25 years.
Landbridge, which took over the listed WestSide group that owns 51 per cent of the Meridian gas fields at Moura in Queensland, said it would find a suitable Australian buyer for the 20 per cent stake held by the Northern Territory government, although no deadline has been set for a sale.
The NT will retain the Stokes Hill Wharf, Fisherman’s & Hornibrook’s Wharves and Frances Bay facilities. It will also retain a range of oversight and regulatory functions including the regional harbourmaster role and — through the independent Utilities Commission — responsibility for price and access regulation.
Darwin is the latest in a string of ports sold by cash-strapped state and territory governments as they seek funds for much-needed infrastructure. The price is understood to equate to around 25 times 2015 earnings before interest and tax, which is at the lower end of the range of multiples for other local port sales.
Landbridge operates a 30 million tonne per annum port in North Haizhou Bay in Shandong province, between Beijing and Shanghai. Landbridge is in the process of expanding its port capacity to in excess of 200 million tonnes per annum — more than 65 times the current volume at the Port of Darwin.
Landbridge also has hotel and tourism, trade and manufacturing, real estate and petrochemical interests in mainland China, together with interests in Australia through its subsidiary WestSide Corporation, a Queensland-based oil & gas producer.
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(13-10-2015, 07:26 AM)greengiraffe Wrote: Chinese buy nation’s largest dairy, Van Diemen’s Land Company
Sue Neales
[Image: sue_neales.png]
Reporter - Rural/Regional Affairs
[Image: 733307-8f60052e-70d5-11e5-ba96-95f70c84c9e6.jpg]
A Van Diemen's Land Company farm at Woolnorth in Tasmania. Picture: Peter Mathew Source: Supplied
[b]Australia’s largest and oldest dairy farm has been effectively sold for $220 million to Chinese owners. Herman Shao-ming Hu and Kenny Zhang are finalising the purchase of a majority interest in the 190-year-old Van Diemen’s Land Company (VDL) in Tasmania.[/b]
The near-completed deal comes in the same week as federal parliament prepares to debate the Chinese-Australia free-trade agreement, and will be a test of Treasurer Scott Morrison’s attitude to foreign investment.
Mr Hu and Mr Zhang through their respective companies, Ryoden Development and the Australia-registered Waratah Corporation, will each buy about 35 per cent of VDL from current owner New Zealand’s New Plymouth Council.
The other third of Australia’s biggest single milk producer is set to be bought by the Lempriere Capital equity managers, linked to the Melbourne-based Lempriere family, noted wool traders.
The deal is one of Australia’s biggest agricultural sales to foreign investors and will require approval by the Foreign Investment Review Board as it is significantly larger than the new $15m approval threshold set earlier this year.
In 2012, the Lempriere group also organised the sale of Australia’s largest cotton farm and irrigation water holder, Cubbie Station, to another Chinese company, Shandong Ruyi, for $240m, retaining a 20 per cent stake for itself.
Hong Kong-based Mr Hu and former Howard government communications minister Richard Alston, chairman of Waratah Corporation, visited Tasmania last week to inspect the 25 dairy farms owned by VDL.
They met Premier Will Hodgman and State Growth and Energy Minister Matthew Groom.
Neither Mr Hu, who is a deputy of China’s National People’s Congress and chairman of Hong Kong’s City University, or Australian-educated mainland Chinese property developer and coal billionaire Kenny Zhang, have any previous agricultural interests.
But both Chinese companies have access to distribution and marketing channels in China and Hong Kong, where any food and farm products they produce in Australia can be sold directly.
VDL’s new Chinese owners plan to further expand and develop its farms and associated infrastructure to focus on China’s growing demand for infant baby formula and milk-based health drinks for its ageing population.
There are also suggestions the company may build its own milk powder plant to enable all its milk production, processing and distribution systems to remain within its own networks.
One of the key reasons for Mr Hu and Mr Zhang’s interest in VDL is understood to be the location of its dairy farms and the 19,000ha of land it owns in remote Tasmania.
They believe foods grown and produced from Tasmania, and potentially marketed under a special new brand highlighting VDL’s centrepiece station Woolnorth as the location of the world’s cleanest air and water at Cape Grim, will sell particularly well in China.
VDL runs a massive herd of 29,000 dairy cattle on a combined 19,000ha of fertile farmland in northern Tasmanian.
Its 18,000 milking cows, most located on Woolnorth station on the state’s isolated northwest tip, as well as 12 other farms, produce more than 100 million litres of milk a year, making the VDL company Australia’s largest single milk supplier.
The Bureau of Meteorology also has an air-testing station at Cape Grim, while VDL’s Woolnorth farm is already home to 62 wind turbines, majority-owned by another Chinese company, the Shenhua Energy Group
Mr Zheng, managing director of Waratah Corporation which started life as his first business Waratah Paint, earlier this year flagged his move out of investment in the slowing mining and resources sector into agribusiness in Australia and New Zealand.
“With the domestic food safety problem becoming more and more serious, most Chinese are paying more attention to safety and healthy food,” Mr Zheng wrote in a recent message on his company website.
The Tasmanian government, which did not respond to requests for comment yesterday, is understood to be thrilled by the Chinese interest — and much-needed foreign capital — into Australia’s smallest and poorest state and its booming dairy industry.
There are also hopes other Chinese investors may now invest in Tasmania’s ageing container port at Launceston or at Burnie — as well as in direct shipping services between Tasmania and China.
None of the companies involved in the sale would comment yesterday.
The company has been informally on the market for the past three years, with potential Chinese investors always prominent in talks.
Sources told The Australian that, while formal purchase papers had not been signed, contracts were well advanced and would proceed to signing ahead of FIRB approval within days.
Lempriere Capital’s purchase of one-third of Tasmania’s biggest dairy operation marks a nostalgic return to its roots.
Its heritage goes back to 1823, when Tasmanian woolgrower and trader Thomas Lempriere founded the Bank of Van Diemen’s Land, Australia’s second bank.
OnCard launches counter bid for Van Diemen’s Land dairy group
Eli Greenblat
[Image: eli_greenblat.png]
Senior Business Reporter
Melbourne
[Image: 455088-847073ee-7155-11e5-87c5-82c509632f8f.jpg]
Van Diemen's Land’s historic farm at Woolnorth in Tasmania. Source: News Limited
[b]OnCard International, which is looking to ditch its focus on technology and switch to the highly lucrative dairy sector, has entered the bidding contest for the 190-year old Van Diemen’s Land Company.[/b]
It comes as a Chinese buyer also looks to scoop up the historic dairy and land management group in Tasmania, which is Australia’s biggest single milk producer.
ASX-listed OnCard (ONC), a loyalty, rewards, and payment business, said today it was undertaking due diligence for the purpose of acquiring Van Diemen’s Land, which operates a substantial dairy-based farming business in north west Tasmania.
It has made a non-binding offer for the Tasmanian business and paid a deposit, offering a counter bid to two Chinese partners, Herman Shao-ming Hu and Kenny Zhang, who The Australian reported had made a $220 million offer to buy a majority interest in Van Diemen’s Land.
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Mr Hu and Mr Zhang, through their respective companies, Ryoden Development and the Australia-registered Waratah Corporation, would each buy about 35 per cent of Van Diemen’s Land from current owner New Zealand’s New Plymouth Council.
The other third is set to be bought by the Lempriere Capital equity managers, linked to the Melbourne-based Lempriere family, noted wool traders.
OnCard chairman Rob Woolley, who is also chair of baby organic infant formula company Bellamy’s Organic, told The Australian that to his knowledge Van Diemen’s Land had not yet been sold to the Chinese bidders and that OnCard was considering its own bid.
“This opportunity is consistent with OnCard’s strategy to ultimately build an integrated business based on premium food products primarily sourced from Tasmania,’’ OnCard said in a release to the ASX.
Jane Bennett, who was recently hired as head of strategy at OnCard, is also a director of Van Diemen’s Land. She has been asked to stand aside as a director of VDL while the bid is on.
Investors immediately warmed to OnCard’s move, sending its shares more than 20 per cent higher to 40 cents.
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China giant Cofco looking at beef, dairy sectors
Damon Kitney
[Image: damon_kitney.png]
Victorian Business Editor
Melbourne
[b]China’s biggest food company, Cofco, plans to look at investments in the Australian dairy and beef industries as it moves to become the face of China’s transformation of its biggest state-owned enterprises into globally competitive corporations.[/b]
Cofco president Patrick Yu told a private roundtable forum in Melbourne, hosted by the Australian not-for-profit The Global Foundation, that Cofco was at the forefront of SOE reform and that more partnerships with Australian companies would help drive its new global, commercially focused mandate.
“For us it is very important to build a supply chain by working together with our partners. We are becoming a global citizen. We are not just a Chinese company any more,’’ Mr Yu told the forum during a rare visit to Australia.
In unusually frank comments for the CEO of a top government-backed Chinese enterprise, he acknowledged it was challenging for an SOE to become more market-oriented.
But he said the Chinese government planned to delegate more power to the commercial platform of Cofco and that his company’s “systems’’ were starting to change as a result.
He said Cofco’s management team and staff were learning to balance the demands of playing by global rules on the global stage while at the same time growing a local identity in the areas in which it operates, noting it “wasn’t easy”.
“While we have to be globalised, we also have to be in the local circle. You have to work closely with local industry, local people.”
Cofco — or China National Cereals, Oils and Foodstuffs Corporation — is one of the largest SOEs of the 49 directly administrated by China’s State Council.
Last year it was one of a handful of enterprises chosen by the authority to lead reforms of the SOE sector after a string of poor international investments by SOEs led to huge losses across a range of sectors in recent years.
As China’s largest food processing, manufacturer and trader, Cofco has bought several smaller domestic firms in recent years. Then last year it made its biggest steps onto the global stage with $US2.7 billion to acquire Dutch grain trader Nidera and 51 per cent of Noble Group’s agriculture unit, giving it new pathways into South America and central Europe.
In the interim, in 2011 it made its first acquisition in Australia, paying $145 million for Tully Sugar in Queensland, which supplies 10 per cent of Australia’s annual sugar crush.
Mr Yu said Cofco had learned plenty from its ownership of Tully that it was applying to other parts of its empire, including sending its Tully Sugar farming expert to Brazil in a bid to reduce the company’s sugar chain production cost from its South American operations.
Mr Yu added that Australia remained a prime target for investment.
“With Chinese consumers, today people are strongly aware that Australian food and agricultural products are safer, good quality, good products, good innovation to the China market,’’ he told the forum.
“We should have some local partners in Australia. Victoria is very strong in the dairy sector so we should look into that. The other area is protein — I think beef is the next potential area for Australia to China. Australia is in the best position for fresh produce.”
The Australian beef market is enjoying record high prices driven by increased demand from Asia for live cattle and boxed beef.
Last year, Cofco signed a memorandum of understanding for a landmark Asian Food Partnership with the Global Foundation.
It set the terms and understanding between the two for mutual co-operation in contributing to an Asian Food Partnership and to global food security.
“I believe that with the support of the Global Foundation, Cofco can have the chances and opportunities to grow our business not only in Australia, but elsewhere,’’ Mr Yu said. “We can bring China demand and Australian suppliers into China and Australia will become much stronger trading partners in the long run.’’
The Global Foundation is already working with National Farmers Federation chief executive Simon Talbot, who attended the Melbourne forum, to forge relationships with the food-focused parts of Cofco.
Cofco has four companies listed in Hong Kong: China Foods, China Agri-Industries Holdings, Mengniu Dairy and Cofco Packaging Holdings.
“We are putting a team around Simon that develops an innovation centre for SMEs to better understand the China market and work with Cofco as partner,’’ said Global Foundation secretary-general Steve Howard, who will visit Mr Yu again in Beijing early next month.
But Mr Yu said the partnership with the Global Foundation could also extend into other sectors.
“There is (also) much more potential for the Global Foundation to bring together players in the healthcare and education industries,’’ he said.
The Foundation’s Asian Food Partnership with Cofco is also complemented by a focus on supply chains and export infrastructure, which has been led by Aurizon CEO Lance Hockridge over the past 18 months.
Mr Hockridge plans to take a team to China in the coming months to meet with Cofco to examine the company’s supply chains and distribution systems.
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