Chinese investment in Oz co-op to open doors

JD.Com’s investment in the Murray Goulburn Unit Trust has been welcomed as a vote of confidence in the Australian dairy industry.

The international interest came as MG raised its target A$500 million to fund capital investments.

Rabobank International dairy and farm inputs senior analyst Michael Harvey said the investment was a win for both companies.

“We’re seeing strategic partnering becoming more common in dairy and other food and agricultural industries,” Harvey says. “It’s a good thing.”

He says the China market offered a great opportunity for Australian exporters and having a local partnership would help MG to avoid fallout from regulatory changes.

“It’s a huge import market and it’s growing, but it’s very complex,” he said. “Regulatory change and distribution are problematic from time to time so partnering with someone in the market is a win-win.”

Harvey says the JD.Com connection would help Murray Goulburn reach consumers in the market and navigate China’s complexity.

“It’s a wise move,” he says. “Having a partner from China is seen favorably by the Chinese Government and you’re more likely to have access no matter what.”

Dairy Australia analyst John Droppert says the 4.6% stake claimed by JD.Com was not surprising. “JD.Com has an interest in promoting and selling Australian dairy products into their market, and having an interest in Murray Goulburn aligns well with that,” Droppert says. “They are familiar with the products and well placed to make that investment.”

Droppert says the buy-up was another sign of international interest in Australian dairy products. 

“It’s not the first sign. We’ve seen all sorts of international investment and this is another sign of that. 

“The unit trust has been another option for international investors, and it shows there is confidence out there.”

A spokesman for Murray Goulburn says the cooperative was “pleased that high-quality investors have chosen to invest in MG and endorse our strategy.” “Large institutions in Australia, Asia and China have shown strong support.”

The MG Unit Trust will contribute about A$438m though the issue of units; A$62m has been raised via shares issued to suppliers. 

The new units and shares have started trading on a conditional and deferred settlement basis. 

Managing director Gary Helou says: “Many investors share our enthusiasm for creating value by furthering MG’s strategic shift towards premium value-add dairy foods and reducing our exposure to the volatility of the dairy commodity price cycle.”

MG’s annual results will be announced on August 21.

Sixth-biggest holder

With a 4.6% stake, JD.com has become the sixth-biggest holder in the Murray Goulburn Unit Trust behind the Chinese investment company China Resources Ng Fung, which has 4.9%.

A spokesman for JD.com, owned by billionaire businessman Richard Liu, said the investment followed meetings with Murray Goulburn officials.

“The demand in China for imported agricultural products, particularly from Australia which enjoys an outstanding reputation here, is growing rapidly,” the spokesman says. 

“We were impressed with the management during our meetings and decided to invest. We sell sub-brands of Murray Goulburn on several of our platforms, including our cross-border JD Worldwide platform and our direct sales channel.
“Devondale long-life milk has seen encouraging growth as Chinese consumers look to buy more imported milk.”

The spokesman would not comment on speculation about further investments in Australian dairy.