Australia’s Macquarie Group has purchased a 49% stake in cotton farm Cubbie Station from a consortium led by Chinese conglomerate Shandong Ruyi for an undisclosed sum, the parties said in a joint statement on Friday.
The sale comes seven years after Australia’s government approved Shandong Ruyi’s A$232m ($158m) purchase of an 80% share in Cubbie on condition it would cut its stake to 51% within three years.
"Cubbie is one of Australia’s premiere agricultural assets and aligns with our investment thesis for long-term sustainable farming operations," Liz O’Leary, the agriculture head of Macquarie’s Infrastructure and Real Assets division, said in the statement.
The 2012 sale of one of the southern hemisphere’s largest irrigation farms to China’s Ruyi had drawn anger from some lawmakers who said Australia was losing control of a strategic asset.
Macquarie’s acquisition follows a three-year drought in eastern Australia and comes amid criticism of a tax-payer funded environmental scheme to buy water rights from irrigators because it funds developments that lead to higher water usage.
"It’s the bottom of the market for that business," said Rod Campbell, research director at The Australia Institute, a public policy think-tank.
"Cubbie was the originator of a business model based on floodplain harvesting and diverting huge volumes of floodwater into their own private dams."
Located across Australia’s Murray-Darling food bowl area in Queensland state, the 93,000-hectare (229,810 acres) Cubbie property can grow up to 330,000 bales of cotton in a good year, as well as some wheat, barley, sorghum and corn. It also has water entitlements enough to fill Sydney Harbour.
"Maybe they can sell off some water rights. If they’re paying the right price and it rains again, then Cubbie could well turn a dollar for them," Campbell said.
"In addition, the chance to sell overland flow licences might be something that, if you’re well-connected and lucky, maybe you can do."
As part of the deal, Cubbie would contribute up to 10 gigalitres of water to the nearby river-system in dry periods without any compensation from the government’s water scheme, according to the statement.
That is a fraction of the 469 gigalitres of water Cubbie Station can store, according to reports by the Australian Broadcasting Corporation.
Macquarie’s purchase has regulatory approvals but remains subject to certain conditions precedent, the statement said.
Shandong Ruyi, based in the eastern Chinese province of Shandong, is a major player in China’s textile market and ranks among its top 500 companies, with annual sales exceeding 20bn yuan ($2.9bn).