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Australia's Bindaree Beef sells 45% stake to Chinese buyer

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The growing interest by Chinese investors in Australia has driven Shenzhen-listed Shan Dong Delisi Food to pay $105m for a stake in Bindaree Beef Group, in a deal seen fuelled by the countries' free trade agreement.

Shan Dong Delisi Food paid Aus$145m ($105m) for a 45% stake in Bindaree Beef Group, Australia's fourth-ranked meat processor, with volumes of 6,000 cattle per week.

The deal – which implies a value of Bindaree Beef's equity at some Aus$320m, including the latest investment – comes eight months after the group revealed it was seeking a foreign investor to make a cash injection of Aus$100m to bankroll a drive to expanding processing and export operations.

Bindaree Beef in July revealed it had sold an undisclosed stake to exporting group Sanger Australia, in an all-share tie-up.

However, the Shan Dong Delisi Food deal, signed over the weekend, will give Bindaree Beef Group (BBG) access to a network of 700m people claimed by the Chinese company.

"Delisi's… established distribution channels open up new avenues for BBG to leverage China's growing appetite for beef protein," Bindaree said.

Growing market

Indeed, Chinese beef demand is expected to reach 7.45m tonnes next year, up 100,000 tonnes over five years, putting the country close to overtaking the European Union as the world's third-ranked consumer.

But with domestic production growing at a far slower pace, imports have soared, forecast at 700,000 tonnes in 2016 - up from just 29,000 tonnes in 2011, on US Department of Agriculture data.

Australia, which vies with Brazil for second rank in beef exports, has taken a large proportion of this export increase, thanks to its geographical proximity and the impact of persistent dryness in encouraging cattle ranchers to sell.

Elevated prices - which hit a record 595.25 Australian dollar cents a kilogramme last month, as measured by the eastern young cattle indicator – have also encouraged sales, with demand by the US for imports, encouraged by the strong dollar, also supporting the market.

'Enormous benefits'

Australian meat exports to China are expected to get a further boost from a free trade agreement signed between Beijing and Canberra in June, which will over nine years eliminate import tariffs of 12-25% on beef products.

"With the benefits from the free trade agreement flowing to the Australian beef industry, the opportunity to become a premium beef supplier to China is one that we expect will bring enormous benefits," said James Roger, the Bindaree Beef chief financial officer.

Shan Dong Delisi Food - whose operations extend from seeds to slaughter, and which has a stsckmarket value of nearly $900m - termed the deal a "win-win co-operation".

The deal, which is subject to approval by Australia's Foreign Investment Review Board, is the latest in a series of Chinese investments in the country – some of which, in land, have provoked unease, and indeed spurred an enhancement in the board's scope.

The deal also echoes the $7bn takeover two years ago by China's Shuanghui International of US-based Smithfield, the world's top pork producer.


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