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China buys full control of Pentag, extending Australia drive

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Queensland-based Pentag Nidera unveiled plans to expand into a nationwide grain trader, and in sorghum exports to China, as it became the latest Australian group to receive a cash injection from Chinese investors.

The group, which has historically focused on Australia's eastern grain belt, from Queensland to South Australia, said that it would "now move forward with plans to expand our origination and trading footprint into other key producing regions around the country".

While not detailing where this drive would take it, the only two major grain-growing states it does not cover are Western Australia - the top producer, where CHS Group is the dominant merchant – and Victoria.

The strategy will also see Pentag Nidera "bolstering" its position as Australia's top exporter of sorghum, which is grown mainly in Queensland.

And expansion would heighten competition in an Australian market which has already attracted investment from the US - through for example CHS, and Archer Daniels Midland, which is a major shareholder in grain trader GrainCorp – besides from Japan's Sumitomo Corp, as well as China-backed Nidera.

China expansion

Monday's deal will see Nidera, which has historically held 51% of Pentag Nidera, take complete ownership, buying out other shareholders including Japan's Toyota Tsusho, the trading arm of the Toyota vehicle giant, which bought a 10% stake three years ago.

Australian investors who helped co-found the grain trader in 2005 are also selling up.

The deal represents a second Chinese investment in a week in an Australia agribusiness, after Shenzhen-listed Shan Dong Delisi Food agreed to pay $105m for a 45% stake in meat processor Bindaree Beef Group.

Cofco, the state-backed Chinese crop trader, took control last year of Dutch-based Nidera, which employs more than 3,000 people worldwide, and claimed annual turnover of more than $17bn.

'Direct access to China'

Indeed, Dave Lengren, the Pentag Nidera chief executive, underlined the importance of Nidera's links to Cofco, flagging "direct access to the fast-growing Chinese market, and to Cofco's downstream processing and distribution activities.

"Importantly, this comes at the same time Australia is moving to strengthen trade links with China through the recently signed free trade agreement," a deal also highlighted last week by Bindaree Beef in unveiling its investment from China.

Nidera's "particular" strength in Asia "has already allowed Pentag to grow and develop important export markets, particularly into China for sorghum", Mr Lengren added.

"The Nidera-Cofco connection will now accelerate that development even further and faster."

The comments come at a time of some uncertainty over Chinese imports of feed grains, given a growing stress by authorities on running down the country's large corn inventories.

Officials have already reportedly begun investigating imports of US distillers' grains, or DDGs, a corn-based feed ingredient, over allegations of dumping, but import volumes of sorghum appear to be holding up.

By Agrimoney.com

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