Leading Melbourne investment banker David Williams has said its unlikely the Foreign Investment Review Board (FIRB) will block the sale of Australia’s biggest dairy, to Chinese investors.
Late last week, it was announced a new buyer had been found for the multi million-dollar Van Diemans Land Company (VDL), in North-West Tasmania.
Australian company OnCard International Limited, soon to be renamed TasFoods, had entered into what was believed to be a $250 million sales and purchase agreement to buy VDL, fromowner Taranaki Invesment Management Limited (TIML).
Mr Williams said the backflip, in which it was believed VDL would now be sold to Chinese giant New Hope Group, might even encourage more Australian investors to look at putting money into agriculture.
“On the contrary, I think it gives people more encouragement, they see value where they haven’t seen it before,” Mr Williams said.
“Sooner or later, the tide is going to turn, as they start asking, why do all these people see value, where we don’t ?”
Foreign investors were operating in a low interest environment and came with supply chains and customers, in place.
“They think –‘I can take that milk out of north west Tasmania, and can plug it into existing distribution channels in Tasmania’,” Mr Williams said.
New Hope earlier this year joined with Moxey, the Perich family’s Leppington Pastoral Company and the listed Freedom Foods in a consortium called Australian Fresh Milk Holdings.
AFMH wants to ramp up milk production destined for the local and Chinese markets.
The VDL decision followed the Federal Government’s blocking of theforeign sale of the sprawling 101,411-square-kilometre S. Kidman & Co cattle stations.
Trade Minister Andrew Robb described the decision as “political” and backed greater foreign investment in Australian agriculture.
Treasurer Scott Morrison announced the sale decision last week,citing the national interest clause in the Foreign Investment Act, the size of the 10 properties in the portfolio and national security issues around access to the Woomera weapons testing range.
“Australia has always depended on foreign investment for agriculture, because no bugger here will put money into the sector,” Mr Robb said.
“You can’t get an Australian investor to put money into agriculture for love nor money. “Even sophisticated Australian investors won’t put money into it. Agriculture is too long term for them, even though it’s our great strength.”
Mr Willliams said TIML had been trying to sell VDL for at least five years.
“I am not sure it is even a higher bid;if you look at the wording, they are very careful – it is a ‘superior commercial proposal’.”
He said the successful bid was likely to coverthe entire price for VDL, rather than the cash, scrip and loan deal put up by TasFoods.It appeared TasFoods was offering $184m in cash, “and are saying, ‘take some scrip for $46 million and we will owe you $20m’.”
“The new bidder is saying ‘I will give you $245m, all in cash – it’s entirely possible.”
He said under the new deal, 10 per cent of the equity would be offered to locals.
“The only people who would go through that would be a foreign buyer and the only foreign buyer is likely to be Chinese – that’s my best guessand based on all the evidence,” he said.
VDL could be expanded to milk 40,000 cows, a processing plant could be constructed to produce milk powders and value adding, using the name in branding, was also possible.
“If the buyer is someone like New Hope, which I suspect it probably is, they will have pockets to expand VDL to the point where it should have been, years ago.
“You would be crazy not to do value adding, the opportunity is to use that farm and the position in Tasmania as a branding opportunity in itself.”
Tasmanian Farmers and Graziers Association president Wayne Johnston said the organisation had no concerns about VDL going to a foreign buyer.
He said while it would have been good to see it sold to Australian interests, it had been in foreign hands, since its inception.
“I’m not fussed, it was a commercial decision and if I was selling something I would want best deal I could get,” Mr Johston said.
This story Administrator ready to work first appeared on Nanjing Night Net.