M&A

Milk shake-up

Another Australian asset snapped up by Chinese buyers

Cow w

Upset by the moos?

The latest chapter in Australia’s long-running debate about accepting Chinese investment now seems set to close, following the confirmation of the sale of Tasmania’s largest dairy farm, Van Diemen’s Land Company (VDL), to a Chinese buyer (see WiC305 for a recent review of the investment climate).

Last month Canberra waved through the $280 million acquisition by Moon Lake and its owner, Chinese billionaire Lu Xianfeng, after advice from the Foreign Investment Review Board that it wasn’t contrary to the national interest.

The approval includes new stipulations about transfer pricing and tax avoidance but they have done little to assuage opponents of the bid, who claim that most of the dairy’s output will now be sent direct to China as milk powder.

Andrew Wilkie, a local member of parliament, blasted the takeover, describing it as confirmation that “the government either doesn’t understand or doesn’t care about the importance of Australian ownership of strategic assets”.

He added: “Shipping out bulk low value commodities, whether it be milk or woodchips, isn’t the answer to Tasmania’s economic challenges; if you want to add value and grow the economy, then a prestigious ‘place of origin’ VDL food brand, especially one with associated tourism components, would have been a much better option.”

A sale had been agreed with the local TasFoods consortium. Moon Lake then offered more than $20 million more, although the premium paid has deepened the suspicions of the deal’s detractors.

“[VDL] has only made money once in 30 years so why is this company paying way over the odds?” asked South Australian senator Nick Xenophon. “Is it because they value food security more than we do?”

His concerns chime with fears that the Chinese are already putting pressure on Australian dairy resources, prompting restrictions on purchases of milk powder by tourists (see WiC309).

Moon Lake has committed to processing VDL’s annual 100 million litres of milk in Tasmania. And dairy experts have laughed off the warnings about the risks to local supply, pointing out that Australia’s total milk pool is about 9 billion litres.

As chairman of Sydney-listed Kresta Holdings – which is Australia’s biggest window coverings retailer – Lu Xianfeng is better known than most of the other Chinese bidders for Australian assets. And in VDL’s case the narrative about defending Australian ownership is a weak one, as Moon Lake is buying the business from New Zealand’s New Plymouth District Council. In fact, VDL has never been controlled by an Australian shareholder since its founding in 1825.

“How are foreigners from China any different than foreigners from New Zealand when it comes to owning local farms? Only xenophobia explains why ‘white’ ownership of our assets is OK, but Asian investment is not,” complained an op-ed in Melbourne’s Herald Sun.

Nonetheless, critics of the deal worry that more Chinese offers for Australian assets might get the green light over the next few weeks, including the takeover of the giant Kidman cattle station. Chinese firms Genius Link Group and Shanghai Pengxin are said to be frontrunners in the Kidman sale, after taking Australian partners and agreeing not to buy land near an adjoining missile range in an effort to overcome objections by regulators, who rejected their first bid late last year.

Inside the farming sector itself, the view is often that Chinese money is welcome because local investment groups aren’t as willing to put their own capital into agricultural businesses.

“Agriculture is a long-term investment. In many cases it is a very good investment,” noted an editorial in the Weekly Times, Australia’s leading rural newspaper. “You can’t blame the Chinese for buying our farms if they are allowed to. At least they see the potential.”


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