AUSTRALIA: China-led group to buy largest cotton farm
The Australian government has given the go-ahead for the sale of the country's largest cotton producer to a consortium led by Chinese textile company Shandong Ruyi.
Cubbie Group, which has been in administration for the past three years, covers 93,000 hectares in South West Queensland, and has the ability to produce 330,000 bales of cotton, according to its website, as well as other agricultural crops.
The bid, for an undisclosed sum, will see Shandong RuYi take an 80% stake in Cubbie, while Australian wool trader Lempriere Pty will take the remaining 20%. As a condition of the deal, RuYi will reduce its interest to no more than 51% within three years.
Lempriere will be responsible for operating and managing Cubbie Group, including the marketing and sale of its cotton production on international markets in conjunction with the existing management team.
Nevertheless, the sale has raised concerns that foreign investment in Australia's agriculture sector, especially by China, could escalate in the same way as in other sectors like mining and minerals.
China is the biggest buyer of Australian cotton, and in the 2011/12 season, which ended on 31 July, made record purchases of 5.2m tons as part of efforts to build its national cotton stockpiles.
Textile companies like Shandong Ruyi, which has 20,000 employees and an operation that extends from spinning to garment production, are increasingly seeking to build vertical businesses that give them control of the whole supply chain from the raw material onwards.
This not only ensures material supplies, but also gives them the large scale to continue remain competitive.
Shandong Ruyi has already invested in Australia, last year buying wool property Larundel and committing to work with the industry in the production of ultra-fine merino.
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