As the government cracks down on foreign investment in agricultural land, one person set to attract more scrutiny is Asia’s richest man, Li Ka-shing, who has quietly become the second-largest owner of vineyard holdings in Australia
When the federal government’s new register for foreign investment in agricultural land comes into force, one person set to attract more scrutiny is Asia’s richest man, Li Ka-shing. His companies have been busily buying up vineyards to become the second-largest owner of vineyard holdings in Australia.
The Hong Kong-based 86-year-old is worth an estimated $30 billion and best known in Australia for having amassed a large portfolio of electricity assets and gas distribution pipelines. He’s also become a dominant player in controlling the grapes that go into wine.
The entrepreneur’s timing has been spot on; he has scooped up vineyards for low prices from Australian wine companies seeking to raise extra cash in a notoriously capital-hungry industry. It appears that he’s also picked the low point in the cycle, just before some fresh optimism arrives in the form of a sharply lower Australian dollar, which will buoy local wine producers and their exports.
McWilliam’s Wines – maker of brands such as Evans & Tate and Mount Pleasant – in early February became the latest to embrace the Li Ka-shing model. It offloaded 650 hectares of vineyards in areas including Griffith in NSW and the Coonawarra region in south-east South Australia for $15.7 million to CK Life Sciences, which in turn owns the Belvino Investments entity, which has been at the forefront of Mr Li’s acquisition spree.
McWilliam’s will lease the vineyards back for 15 years under a long-term agreement. It’s been through a tough time. The company is privately owned by the McWilliam family, which first entered the wine industry in 1877. The company’s latest financial accounts show it made a loss of $3.1 million in 2013-14, even though sales crept ahead by 0.1 per cent to $123 million.
PORTFOLIO COVERS 6000HA
Foreign investment in agricultural land is a highly sensitive issue. Prime Minister Tony Abbott and Treasurer Joe Hockey on Wednesday announced that from March 1 the cumulative value for foreign purchases of agricultural land that will be subject to approval by the Foreign Investment Review Board will be cut from $252 million to $15 million. From July 1, the Australian Taxation Office will create a register of all foreign investment in agricultural land.
Intervention in deals is a distinct possibility, with the Abbott government’s blocking of an attempted takeover of grain handler GrainCorp by United States firm Archer Daniels Midland in late 2013 still fresh in the minds of the rural industry.
Stephen Strachan, a director of wine industry advisory firm Gaetjens Langley, said it is an increasing trend for small and medium-sized wine companies to want to access cash flow by undertaking sale and leaseback transactions of their vineyard holdings.
“More and more companies are trying to get those hard assets off their balance sheet and invest in their brand and distribution,” Mr Strachan said.
Mr Li, who reportedly rises at 5am and plays golf for at least an hour each day, has simple tastes – although he does fly around the globe in a Gulfstream 550 private jet. His empire started in 1950 with the manufacture of plastic flowers and has grown to employ 280,000 people across the globe. The McWilliam’s purchase takes Mr Li’s Australian vineyard portfolio to more than 6000 hectares.
Mr Strachan, who was chief executive of the Winemakers’ Federation of Australia from 2003 to mid-2012, said there is more optimism in the local industry now the Australian dollar has fallen below US$0.78 from a high of US$1.10 in mid-2011, making Australian exports much more competitive on overseas supermarket and liquor store shelves.
He also said there had been increasing interest from Chinese buyers in the last few months after a soft spot early last year when austerity measures imposed by the Chinese government crimped demand for higher-end wines.
Read more: http://www.afr.com/business/energy/asian-billionaire-li-kashing-quietly-becomes-australias-secondlargest-vineyard-owner-20150210-13b0qh#ixzz46vUl8Qwm
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