Two of Australia’s Largest Agribusinesses Agree to $100M Merger
November 28, 2017
Craig Mostyn Group (CMG) and V&V Walsh, two of the largest agribusinesses in Australia, have agreed to a $100 million phased deal through which Craig Mostyn will fully acquire V&V Walsh over the course of five years.
Founded in Freemantle, Australia, in 1923 by George Craig and Robert Long Mostyn, CMG has grown to include processing facilities across Western Australia, Victoria, and Tasmania and to produce and market pork, protein meal, lobster, abalone, fruits, oils, livestock, and rendered products used in feed for livestock, pets, and aquaculture production.
V&V Walsh was founded in 1957 as a family business by Vern and Jean Walsh in Busselton, Western Australia, and today is considered one of the leading meat processors and exporters in Australia. Through its processing site in Bunbury, Western Australia, the company has the capacity to process 3,500 sheep and 400 head of cattle per day.
The joining of the two businesses will create a single commercial scale entity that will have the capacity to process more than 1.4 million animals per year, making it a significant platform from which to provide food, feed, and related products to both Australia’s domestic market as well as to buyers in Asia, Europe, and the Middle East.
Under the terms of the deal, a new joint board of directors will be formed, and during the initial five years of the tie-up between the two companies, V&V Walsh will retain its current management team, according to Jim Kennedy, chairman of CMG.
“The transaction allows us to grow in Western Australia while leveraging our capability in managing the meat supply chain, developing new products and extending into new markets,” said Kennedy. “Importantly, these businesses already have many synergies, and the integration will enable greater efficiencies and critical mass in a competitive market both locally and overseas.”
For V&V Walsh, the deal gives the company a place from which to achieve growth while also providing for succession.
“Importantly, this deal means a business developed here in WA over 60 years ago will remain in Australian ownership,” said Peter Walsh, CEO and part-owner of V&V Walsh. “We see the Craig Mostyn Group as sharing our vision for a strong, WA-based agribusiness with enormous potential to grow — especially considering the opportunities in the rapidly developing markets in Southeast Asia and China.”
The Ties that Bind
The nascent potential that exists in Asian markets for Australian beef has been long discussed, however in the past two years, more and more business connections between the two markets have been forged, reflecting the fleshing out of a highly valuable trade relationship.
By May 2016 demand for traceable, premium, boxed beef had been soaring in China. To position itself to better meet this demand, Australia Aulong Auniu Wang (AAAW), the cattle arm of Chinese supermarket and department store giant Dashang Group, acquired the key Australian Wagyu beef operation, Kuro Kin, in an off-market deal. Valued at between A$12 million and A$20 million, the deal included the elite 1,100 head Kuro Kin (Black Gold) Wagyu herd and the 3,500 hectare Wooton farm owned by the Bishop family.
With a fully integrated, completely traceable supply chain in mind, Dashang planned to breed its own Angus and Wagyu cattle on its own Australian farms. The cattle will then be processed and sold as branded beef through the group’s retail outlets on the Chinese market, creating the first “dedicated Australian beef outlets in China”.
In August of that same year China’s Shanghai Zhongfu – doing business in Australia as Kimberly Agricultural Investments (KAI), reached a $100 million sale and leaseback agreement with Consolidated Pastoral Co. (CPC) for the historic Carlton Hill cattle station.
One month later, Chinese textile group, Fulida, acquired a 16.58 percent stake in Wellard Ltd., Australia’s biggest live cattle export company, through a deal executed with the company’s founder, Mauro Balzarini.
The largest Aussie-Chinese cattle deal however, occurred in December 2016 when Australia’s Treasurer Scott Morrison granted approval for the sale of the S. Kidman cattle empire to Australian Outback Beef (AOB) – a joint venture between mining magnate, Gina Rinehart and China’s Shanghai CRED for A$386.5 million.
“Now to become the third largest producer of cattle in Australia I think it’s just great,” said Rinehart at the time. “I see an ongoing need for meat particularly in the Asian region and most of our cattle from Australia, three quarters, we export. And of course the value of the land over decades is going to keep increasing and increasing.”
The potential for Australian cattle to satisfy the need for beef and protein in Asia has also been noted by overseas investors who are looking to capitalize upon the potential between Australian cattle production and the Chinese market. Earlier this month, Canadian pension fund – Public Sector Pension Investment Board (PSP Investments) – expanded its Australian beef and cattle holdings when the fund acquired a 15 percent stake in Arcadian Organic Natural Meat Co., one of the largest organic meat companies in the country through its joint partner Hewitt Cattle Australia (HCA).
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