BINDAREE Beef Group has finalised its deal with one of China’s largest meat processors, Shandong Delisi Food Co, which will see Delisi invest $140 million in Bindaree in exchange for a 45 percent shareholding in the company.
The deal signed in China over the weekend values Bindaree Beef Group at just under A$400 million.
Shandong Delisi Food Co is a pork processing company with a market capitalisation of around A$1 billion, incorporated in the People’s Republic of China and listed on the Shenzhen Stock Exchange. The Shenzhen Exchange was informed of the agreement overnight.
The investment is subject to Foreign Investment Review Board approval.
BBG chairman JR McDonald said Shandong Delisi was an ideal partner for Bindaree, as it was a leader in its markets and would provide significant short and long-term strategic opportunities for the company.
“Delisi‘s deep expertise in meat sales and processing, its premium and trusted brands and established distribution channels open up new avenues for BBG to leverage China’s growing appetite for beef protein,” Mr McDonald said.
As highlighted in this earlier article, BBG in February started exploring potential investment partners as part of its strategy to become a “consistently outstanding beef supplier to premium markets in Asia, Australia and other world markets.”
After engaging the PwC Mergers and Acquisitions team in 2014 to advise the Group on raising the capital to expand its capabilities, Bindaree’s group chief executive Andrew McDonald, group chief financial officer James Roger and other BBG personnel held discussions with parties around the world.
Mr Roger said BBG had been engaged in talks with Delisi for the past two months, with the agreement finalised in China over the weekend.
“We are delighted to have Delisi on board. The company has an exceptional business with a sales platform that currently reaches 700 million people in China. We look forward to working with them to deliver our long term strategic plan,” Mr Roger said.
The other important part of the business deal is that as the fourth largest processor of pork in China, Delisi already has a large distribution and cold-chain network across China, which Bindaree will now utilise.
With the benefits from the recently completed China-Australia Free Trade Agreement flowing to the Australian beef Industry, the opportunity to become a premium beef supplier to China was one that Bindaree expected to bring enormous benefits – not just to BBG but to Australia’s broader beef industry, Mr Roger said.
The Delisi investment in BBG is one of the first major deals to be finalised following the signing of the Free Trade Agreement in June by Australia’s trade and investment minister Andrew Robb, and the Chinese commerce minister, Gao Hucheng.
Mr Roger said the joint venture partners were looking to complete the deal within the next three months.
Asked what the injection of $140 million would mean for Bindaree’s expansion prospects, he said the company already had a clear plan of capital works on-site at the plant near Inverell, in Northern NSW, designed to improve efficiency as well as throughput.
“There’s a lot of new technology out there now that potentially will allow us to improve our yields and workplace efficiency,” he said.
Bindaree’s Inverell plant currently processes about 6000 head per week, using two boning shifts and one kill shift per day.
Asked whether further vertical integration plans were now in the pipeline, following the company’s recent purchase of the Myola feedlot near Moree, Mr Roger said while a lot of the company’s ‘firm’ plans were around capital expenditure at Inverell, there were certainly opportunities both upstream and downstream that the company was looking at.
Bindaree Group has participated in three trade missions to China over the last 18 months, the first of which was led by agriculture minister Barnaby Joyce in September 2014.
Background on China meat consumption:
- China population in 2015: 1.35 Billion.
- Total meat consumption in 2014: 87 million tonnes.
- That comprises – 57mT pork (48pc global volumes/42kg per capita); 7.25mT beef (10pc global volumes/5kg per capita); 4mT Mutton (30pc global volumes/kg per capita); 19mT other (Poultry, Seafood, Goat etc/etc)
- By 2020 China will demand 100mT Meat
- Total meat consumption per person: 63.6kg for all meat types, (Australia is approx. 92kg/capita)
- China consumes 28pc of all of the meat protein in the world.
- China’s total beef consumption 2015: 7.25 million tonnes
- Total beef consumption in 2020 is expected to hit 8mt – 750,000t more than this year
- Australia exported a record 150,000t of beef to China last year. Total exports worldwide from Australia were 1.1mt.
- To fill the additional demand for beef in China in 2020, 100pc of Australia’s beef would have to be exported to China.
- China’s annual beef consumption per capita: 5.4kg (Australia 30kg)
- World average beef consumption per person: 11kg.