September 19, 2016

Chinese textile group, Fulida, has acquired a 16.58 percent stake in Wellard Ltd., Australia’s biggest lives export company, through a deal executed with the company’s founder, Mauro Balzarini.

Balzarini has sold nearly half of his shares in the company allowing him to refinance WGH Holdings, his privately owned company that owes $15.8 million plus interest to Wellard, according to ABC.

Under the terms of the deal, WGH Holdings will transfer 66.32 million of its shares in Wellard to Fulida Group Holdings in exchange for funds to repay $15.8 million plus $500,000 in interest to Wellard by the end of September and also in exchange for forgiveness of $33.3 million WGH owes Fulida.

“That Fulida has taken an equity interest in Wellard, and agreed to voluntarily escrow its shares, highlights its belief in the long term future of our business, our industry and the potential that China represents,” said Balzarini, according to ABC.

After pursuing a float on the ASX last December, Wellard has faced numerous challenges including multiple livestock ship breakdowns and cuts to the operation’s profits due to the soaring cost of sourcing Australian cattle for export, reports Farm Weekly. These headwinds led to the company posting profits of $14.8 million after tax, a fraction of the prospectus forecast of $46.4 million only three weeks ago.

Wellard is not the only company in Australia’s live export industry that has been facing troubles. The loss of profitability has cut into Ruralco’s business, while Elders announced only a week ago that it was leaving the live export business and plans to place its live exports operations up for sale after its trading year ends in September – a move it says is due to a “shift in financial priorities” according to ABC.

A Joint Venture and $100M Farmland Sale

This deal between Balzarini and Fulida is a deepening of existing ties between the two companies and is likely a precursor to an overseas move by Balzarini.

In August 2015, the two companies announced the formation of Wellao Joint Venture, a formal 50-50 joint venture designed to supply and market Australian cattle and beef on the Chinese market, and the eventual progression of constructing a series of feedlots and an abattoir in China for fattening and processing.

“The JV’s principal objective is to take advantage of the animal health protocol and the Free Trade Agreement recently signed between Australia and China for the live export of slaughter and feeder cattle through the establishment of a live export, feedlotting, processing and beef distribution business,” Wellard said in a company statement announcing the 2015 agreement.

Farm Weekly reports that Balzarini has also recently sold his home in Perth and The West Australian reports that he has placed WGH’s farming interest on the market for a reported $100 million in preparation for the move of his business to Singapore.

The farms that form grain and livestock production hubs in Dongara, Watheroo, and Kohonup include 37,800 hectares of land and are operated by WGH subsidiary Giovi Ltd. In addition, a foreign investor who is prominent in West Australia is reportedly in the middle of negotiations to acquire the 13,350 hectare Watheroo grain farms for $20 million.

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Lynda Kiernan