Is Bindaree’s $140m deal with Chinese investor on the rocks?

Jon Condon, 15/07/2016

RUMOURS have been rife across the red meat industry over the past week or so that NSW processor, Bindaree Beef’s $140 million investment deal with China’s Delisi Group has fallen over.

An initial June 30 deadline for a contract agreement and deposit has now passed, but Bindaree sources told Beef Central this morning that a one-month extension had been agreed to, to try to consummate a deal.

Bindaree Beef Logo 2013 - Black“We’re working with Delisi to try to complete the agreement by July 31,” a company spokesman said.

The spokesman confirmed that Bindaree was still confident that a deal would be done, but said confidentiality agreements with Delisi made it impossible to provide detail.

He would not confirm or deny a local Inverell rumour that a deposit had already been paid.

Market observers are pointing to the dramatic turnaround in processor fortunes that have occurred over the past 12 months a likely contributor. In essence, Bindaree’s balance sheet this time last year would have looked far more juicy than it does today – as it would for every significant processor in the country.

Others simply say that closer scrutiny of Bindaree’s books under Delisi’s due diligence appear to have shown that the company’s financial performance was not as initially described.

Onlookers are also pointing to a potential link with an as-yet unconfirmed staff retrenchment which rumours suggest would halve the plant’s current capacity. Bindaree would not confirm or deny the retrenchment rumour when Beef Central raised it this morning. It is known that the company did, however, reduce casual employee numbers by around 100 three weeks ago. See today’s separate article.

Beef Central raised suggestions of problems with finance from Delisi with Bindaree management some months ago, but was told at the time that the process was being delayed by regulatory and technical difficulties.

We first wrote about the proposed $140 million investment deal with Delisi, one of China’s largest pork processors, for a 45pc stake in the Bindaree business in this article in October last year.

Bindaree Beef chairman JR McDonald said at the time that 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.

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.

Beef Central has this week seen a document dated July 5, described as a special announcement from the intending investor, Shandong Delisi Food Co’s board of directors.

While the computerised English interpretation makes its message somewhat ambiguous, it appears to confirm that Delisi still sees ‘major uncertainties’ in the investment.

Cautioning over investment risk, the Delisi board said if the two sides failed to continue cooperation, it risked termination of the agreement.

“If the two sides agree to continue cooperation, the company will re-sign cooperation agreement in order to complete the transaction,” it said.

The document appears to confirm that the proposed deal already has Australian Foreign Investment Review Board approval, and similar approval from the China Development and Reform Commission.




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