China chalked up another land acquisition in Australia, as Fucheng Group purchased a 31,000-hectare cattle property at a price which exceeded market expectations – and the threshold requiring the deal to require government clearance.
Fucheng for Aus$28.0m ($20m) bought the Woodlands cattle-fattening property in southern Queensland from MP Evans, the London-listed palm oil group which first put the ranch up for sale six years ago.
The deal - which excludes the purchase of the cattle and equipment at the site, estimated by MP Evans to be worth more than Aus$10m – is considerably more than many commentators had expected for the site.
"It's a decent price," Ed Hugo, head of research at London broker VSA Capital, told Agrimoney.com.
"The feeling was that it would got for a much smaller price than that."
Indeed, MP Evans in 2010 took Woodlands off the market after an initial attempt to sell the site fell flat.
While Mr Hugo declined to reveal what price VSA had been expecting, Agrimoney.com earlier in the process heard valuations well below the level finally achieved.
However, a rally in Australian cattle prices - spurred by strong demand for beef imports from the likes of China and, thanks to a strong dollar, the US – has fuelled a string of ranch purchases, many by Chinese buyers.
The eastern young cattle indicator on Tuesday hit a record high of 591.25 Australian dollar cents per kilogramme, up 63% year on year.
In July, Xingfa Ma, the Chinese ball-bearing billionaire, bought two cattle stations in Northern Territory, with a combined 40,000 head of cattle, in an Au$47m deal.
In March, Hailiang Group, seeking direct access to Australian beef to put on the shelves in its Chinese supermarkets, spend Aus$31.5m on the Hollymount cattle station in southern Queensland, and paid a further Aus$10m for a cattle and cropping property nearby.
Two Chinese groups - conglomerate Ningbo Xianfeng New Material, and former state-owned textle machinery group Rifa – are said to be on the shortlist of bidders for the 100,000-square-kilometre S Kidman and Co beef empire, on the market for more than Aus$325m.
However, the extent of interest from foreign investors in Australian farmland has raised alarm bells in the country, which earlier this year tightened oversight of sales of agricultural interest to buyers abroad.
The government in March cut to Aus$15m, from Aus$252m, the threshold at which foreign land ownership required official clearance, with the value applying to cumulative purchases.
MP Evans said that the sales of Woodlands was condition on "various regulatory approvals", including clearance by the Foreign Investment Review Board, with consents "all expected to be received within approximately three months".
Nonetheless, one investor that Agrimoney.com spoke to said that uncertainty over approval may explain a relatively tepid reaction by investors to the MP Evans sale, despite the higher-than-expected price, with shares in the group closing up 1.3% at 360.25p in London.
However, broker Peel Hunt said that proceeds from the deal were "similar to the carrying value in the accounts".
MP Evans - which has also put its 34.4% stake in a further Australian cattle enterprise, North Australian Pastoral Company, up for sale – said it would use the proceeds of the Woodlands disposal to repay some of its debt, and to fund expansion in Indonesian palm oil production.
"This disposal is in line with the company's strategy to focus on palm oil and releases additional funds to invest in this sector," Peel Hunt said.
MP Evans on Wednesday unveils half-year results.
By Mike Verdin