Chinese billionaire Jiang Zhoabai leads stampede for S. Kidman & Co

You wouldn’t know it, but the ­Chinese billionaire in the box seat to buy one of the nation’s most iconic cattle companies, S. Kidman & Co, has quietly visited ­Australia at least five times in the past three years.
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Shanghai-based Jiang Zhoabai, 52, whose fortune is estimated by Forbes as worth $US1.88 billion ($2.6bn), doesn’t travel with a huge entourage. Sometimes he has his family in tow.
“You see him and you just look at him as a bloke — immediately you don’t think billionaire,” says Gary Romano, the man hand-picked by Zhoabai in March last year to run his New Zealand farming interests and to spearhead his global expansion plans.
“Yes he does own some of the assets people own when they are wealthy. But he is not that way wired at all.”
Two years ago Zhoabai visited Auckland to attend the first ever celebration to unite the Maori and Chinese cultures known as the Taniwha and Dragon Festival at the invitation of New Zealand’s Maori Affairs Minister.
“He comes out to New Zealand periodically. He likes to have ­leisure time in this country and he does in Australia as well,” says the Auckland-based Romano.
“He gets that whole idea of partnering and understanding who is part of the business. He has had multiple business meetings to understand people both in politics and investment.
“There are lots of things he likes about the west. There is a legal framework. There are rules about things. There is an educated workforce. There are good systems to ensure quality.”
Yet three years ago Zhaobai and his giant Shanghai Pengxin Group were viewed by some in New Zealand as anything but friends.
Shanghai Pengxin, whose main business is real estate development but in recent years has ­expanded into infrastructure, technology, hotels, mining and agriculture in Canada, South America, Africa and Asia, ­announced plans to spend $200m on the purchase of 16 run-down North Island dairy farms.
The deal, then the largest-ever foreign acquisition of New Zealand land by value, sparked public fears over foreign — particularly Chinese — ownership of land and was challenged in court twice by a rival consortium of buyers. But that deal and a subsequent one to buy a further 13 South Island farms were waved through by the New Zealand Overseas Investment Office. “People say we have struggled to get regulatory approvals in the past. But we own 29 farms from two transactions that were approved,” Romano says.
Now fresh questions are being asked about Pengxin after an $80m purchase of another New Zealand dairy farm was rejected by the government last month and the company pulled out of a further deal citing unexplained regulatory delays.
As Pengxin’s parent company conducts exclusive due diligence on 11 cattle stations covering more than 100,000sq km of the Australian continent that have been in the hands of Kidman family members for more than 100 years, many are asking if the group might have similar troubles on this side of the Tasman.
The Kidman deal is being viewed as the first big foreign ­investment test for the Turnbull government and Treasurer Scott Morrison. Another Chinese buyer, Hong Kong-based investment fund Genius Link Asset Management, is waiting in the wings if Romano is unable to come to an agreement with the Kidman family. Another is also still said to be in the sale process.
It comes almost two years to the day since Morrison’s predecessor Joe Hockey controversially knocked back a bid by US agribusiness giant Archer Daniels Midland for Graincorp.
The Abbott government earlier this year also tightened restrictions and threshold limits on all foreign purchases of agricultural land, largely in line with the election platforms of its Coalition partner, the Nationals. Foreign Investment Review Board approval is now required for all farm deals once a foreign company owns or plans to buy Australian agricultural land worth more than $15m.
It is understood some of Romano’s team have held preliminary talks with FIRB but the real action is yet to come. The catch in the Kidman deal is that Pengxin’s parent company, the Shenzhen Stock Exchange-listed Dakang Pasture Farming Co — the group run by Romano — is believed to have teamed up with a local player for the bid. Romano won’t comment on the Kidman process, but he does confirm Dakang is “naturally inclined“ to partner with local players.
And while he won’t comment on FIRB processes, he says any deal his group pursues in Australia should not be judged on the basis of what has happened in New Zealand. “Why would that prejudice what we do in Australia?” he asks, noting the New Zealand Overseas Investment Act has much tougher foreign investment criteria than Australia.
“Australia is a different country; you have your own regulatory framework and think about ­foreign investment in your own way and have different views about capital investment … Honestly, to draw a link between one country and another, look at how we have positively improved ­assets in one country rather than simply mapping a regulatory ­response to an application.”
Certainly Pengxin New Zealand Farm Group has been a big investor in its NZ dairies, which are now the envy of many in the industry. “They run a really professional operation in New Zealand. They bought some really tired assets and fixed them up brilliantly,” says one industry rival.
Romano acknowledges that “you always do it tough when you go into a new country as a new person”. “But with time you do the right things and you get the ­rewards,” he says.
Dakang is diversifying from its roots in the Chinese pig industry to becoming a broader international agricultural company and consumer marketer, and is in the process of doing a related party deal with Pengxin to acquire its New Zealand dairy business.
And in the beef industry it doesn’t just want land, but feedlots and abattoirs too.
Dakang is also in talks to take a stake in the Consolidated Pastoral Co (CPC), the group long owned by the Packer family and now controlled by Terra Firma — backed by private equity doyen Guy Hand.
CPC, the nation’s largest ­privately owned cattle producer, is currently looking for a partner to inject $300m into the company to fund growth. CPC plans to issue new shares to a strategic investor that will account for 40 per cent of its expanded capital.
Dakang is one of several parties it is talking to.
“We do want to become an ­integrated supplier of produce to be able to say to ours consumers we don’t just control the supply chain, we have equity along the supply chain,” Romano says, ­although declining to comment on CPC.
“At the end of the day it is about getting that produce into China and getting branded product into China.”
And he says having so-called “skin in the game” is key for the Chinese. “A purely contractual ­relationship doesn’t resonate with the consumer in China. There is more comfort given through ownership in China. Contracts ­always have a use-by date. Having equity gives you security,” Romano says.
Andy Macleod, chief executive of the Pengxin New Zealand Farm Group, says the group has looked at “two or three” dairy businesses in Australia but didn’t get a deal done.
“To the extent that something came up and made commercial sense in Australia, we’d certainly like to look at it,” he says.
Romano is reluctant to ­disclose how much capital the company is prepared to spend in Australia (the Kidman price tag is at least $350m). But he reveals it could raise funds from retail ­investors in China on the Shen­zhen Stock Exchange to bankroll its plans.
Retaining and incentivising local management will also be key. “You don’t only buy the asset, you buy the management team. A team connected into the rest of the business community. We understand there is a lot of stuff we don’t know about. To be a legitimate part of a business community, you need local people not just in operational but executive roles,” he says.
“When we go and buy an asset, every time I talk to them, I am looking at the quality of the ­people.” If the Australian-born and raised Romano gets his hands on a local asset, it will be a case of back to the future.
He once worked with Alcoa of Australia and the Boston Consulting Group, both Australia and in South America, based in Brazil.
His biggest brush with notoriety came two years ago when he resigned as head of New Zealand Milk Products at dairy giant ­Fonterra as the company ­embarked on an infamous global recall of its products because of a contamination scare.
It ended up being a false alarm but the company was fined for its risk-management program and delayed notification of the problems that — ironically for Romano — caused chaos in China.
He says that working for a ­publicly listed company in China like Dakang with a major shareholder who is very wealthy is quite different to a corporate like ­Fonterra.
“In the way they think about investments, how decisions are made. The focus is always on speed and agility and the process does struggle to keep up. Some of that is Chinese, the other is the ­entrepreneurial piece that comes from the owner,” he says.
Romano says Jiang Zhoabai is very active in the running of the company. “He takes a real interest. It would be difficult to imagine him only sitting around the board table,” he says.
And one of the elements arguably in Dakang’s favour in the FIRB process could be the fact that it is not a Chinese state-owned enterprise. Agriculture Minister Barnaby Joyce has ­previously stressed he was not ­opposed to foreign investment in agriculture in general but has ­insisted that tougher limits must be placed on foreign governments or state-owned companies buying Australian land.
Romano is noncommittal on this point, except to muse: “You read the press and you do see that an SOE is regarded differently to a listed or private company.”
Asked about historic Chinese “xenophobia in Australia”, Romano prefers to steer clear of using the term. Instead he views such sentiment as simply a reaction to something that is new and different. At the end of the day, he ­believes actions will always speak louder than words.
“Look at New Zealand. There were lots of cries about what was happening here back in 2012. In terms of peoples’ fears that we wouldn’t be able to run the assets responsibly. You don’t hear any of that debate (any more),” he says.
“After a while you are only as good as what you do.”
Source: The Australian

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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