Shandong Ruyi'S Vision Reaches 1.2 Billion Overseas To Purchase Australian Cotton Industry Giant

When at home and abroad Cotton price When 4500 yuan/ton was upside down and domestic cotton enterprises were in agony over exploding cotton import quotas, Shandong Ruyi Group (000626, Guba) directly extended its vision overseas.

On September 5, the internal executives of Shandong Ruyi (002193, Guba) (002193SZ), a listed company under Ruyi Group, confirmed to our reporter that Ruyi Group is working with Lempriere Pty Ltd, an Australian wool processing company, to acquire the largest local cotton company, the Kubi Cotton Production Base (hereinafter referred to as "Kubi"), for 230 million Australian dollars (about 1.5 billion yuan).

At present, this acquisition has been approved by Australian Treasury Minister Swan and disclosed on the official government website on August 31. However, the change of ownership of this company, which accounts for one tenth of Australia's cotton production, has stirred waves in the country. Opponents believe that this is Australia's "strategic" asset, which may erode the interests of local cotton farmers after acquisition.

　 Operation library is listed

"Shandong Ruyi has not signed a final agreement on the acquisition of Cubbie." The aforementioned Ruyi internal executives said that at present, the acquisition parties have reached a preliminary acquisition plan, and the Australian government has agreed to this plan.

Located in the southeast of Queensland and boasting a total asset of 420 million Australian dollars, Cubbie is the largest private farm in Australia, with an area of nearly 93000 hectares. It operates large-scale cotton and water conservancy irrigation projects, has 51 water use permits, and has a total water storage capacity of 539 million cubic meters on the river, more than the total water volume of Sydney Harbour.

However, due to poor management and long-term drought, the Cubbie Farm with a total debt of more than 320 million Australian dollars was bankrupt and entrusted in 2009. The Australian government tried to invest to nationalize it, but failed in the end. Kubi's creditors, including National Bank of Australia and Sun Group Bank, have been stopping losses by selling Kubi's cotton products

The Australian Treasury stated in the announcement: "M&A will end the uncertainty of the long-term operation of the Cubbie Farm project, ensure the normal operation of the Cubbie Farm, as well as the local employment and economic operation..."

"The purchase price of Cubbie is tentatively set at 230 million yuan." According to the executive, according to the preliminary plan, Ruyi Group purchased 80% shares of Cubbie and Lamier purchased 20% shares.

According to the acquisition requirements, Cubbie needs to be listed after the acquisition, Ruyi Group 80% of the shares need to be diluted to 51%. Ruyi Group has agreed to the above constraints and promised to reduce its equity in Kubi Farm to 51% by selling its equity to a third party in the next three years.

According to the above agreement, Shandong Ruyi Group needs to pay about 1.2 billion yuan of M&A funds.

Ruyi Group, founded in 1972, formerly known as Shandong Jining Wool Textile Factory, claims to have the largest woolen clothing industry chain and cotton textile printing and dyeing industry chain in China. The company involves wool sliver manufacturing, wool worsted, clothing, cotton textile, cotton printing and dyeing, knitting, chemical fiber, denim, home textile, real estate and other industries.

According to the official website of the company, the total assets of the group are 13.1 billion yuan, and it has two listed companies, namely, domestic A-shares and Tokyo Main Board. It has 20 wholly-owned and holding subsidiaries with 30000 employees. In 2011, its operating income was 15.3 billion yuan, ranking 374 among the top 500 Chinese enterprises, its comprehensive competitiveness ranked top five among the top 500 Chinese textile and clothing companies, and its export earnings ranked top five among the top 100 industries.

　　 Acquisition resistance

"The price of domestic cotton is about 5000 yuan higher than the price of imported cotton per ton." The aforementioned executives told reporters that this acquisition can improve the company's global industrial chain and provide a stable source of cotton for the main textile industry.

However, this expansion of Shandong Ruyi has encountered considerable resistance. Australia, which has always relied on foreign capital for development, proposed many conditions to Shandong Ruyi, the acquirer, in this acquisition:

First, once the acquisition is successful, the consortium jointly formed by Shandong Ruyi and Lamier must reduce the shareholding ratio of Cubbie from 80% to no more than 51% within three years; Second, the acquirer promised not to cut jobs, and the treatment of all existing employees remained unchanged; Thirdly, the local family owned enterprise Lanpeier Company will operate and manage Cubbie Company; Fourth, water subsidies. The acquirer also agreed to sell all unused quotas in the water market, which means that the government can buy back all subsidies through this market.

In addition, once the acquisition is successful, Ruyi Group must also report the progress to the Australian Foreign Investment Review Committee every year so that the other party can verify whether it has fulfilled its commitments during the acquisition.

Nevertheless, since the disclosure of the acquisition case, it still caused opposition from people in Australia. Opponents believe that from the perspective of the scale of Cubbie, it is a "strategic asset" of Australia's cotton industry; If the acquisition is successful, the holder of Australia's largest water use license and the largest irrigation land in the southern hemisphere will fall into the hands of the Chinese.

"In this acquisition, water resources are the biggest problem, and Australian water is very precious." Wang Hengyan, senior investment commissioner for Greater China of the Australian Trade Commission, told our reporter that at present, there are a large number of Chinese businessmen going to Australia to invest in mines and other resources, but there are still relatively few in agricultural investment.

In fact, 75% of Australia's cotton output has been exported to China. It is revealed that this acquisition case still needs to be submitted to the Ministry of Commerce of China for approval.

The logic of going to sea

"Overseas cotton is very attractive to Chinese cotton enterprises at present." Hu Keqin, vice president of China Printing and Dyeing Industry Association and vice president of Zhejiang Textile Engineering Association, told our reporter that this is because the price of cotton at home and abroad has been inverted too seriously in the past two years.

Hu Keqin introduced that since about 2000, the domestic cotton textile industry has developed rapidly and the consumption of cotton has been increasing, leading to higher domestic cotton prices, while the price of imported cotton is slightly lower, which has an impact on domestic cotton. "This is because the domestic cotton production is still in the state of small-scale production, with high production costs; while the United States, Australia and other countries are highly mechanized farms, with low production costs."

According to Wang Jianhong, Deputy Secretary General of China Cotton Association, in 2011/12, China's cotton output was about 7.2 million tons, and its consumption was about 9 million tons. In July this year, the price of cotton in China reached 18231 yuan/ton. In contrast, the price of imported cotton, including import tax, was only 14778 yuan/ton, with a difference of 4500 yuan/ton.

According to the report of China Customs, from January to July this year, China's textile exports fell by 0.2% year on year, while imported cotton increased by 133.7% year on year to 3.46 million tons.

"In order to protect China's local cotton farmers, the National Development and Reform Commission issued a quota policy on imported cotton." Hu Keqin recalled that in 2004, China required a quota of 894000 tons for cotton imports, which has not been changed for eight years.

However, this kind of cotton import quota is mainly concentrated in large state-owned cotton foreign trade enterprises and large textile processing plants, and many small and medium-sized cotton enterprises are difficult to obtain the quota qualification. Every year, some enterprises that apply for quotas from the state do not have substantial cotton textile production and trade, and they get the quota and resell it. The quota is from 2800 yuan to 3500 yuan per ton in the market.

"If Kubi becomes a subordinate enterprise of Shandong Ruyi, it can really save a lot of raw material costs." Hu Keqin said that at present, Chinese enterprises are acquiring large overseas enterprises Cotton enterprise There are very few cases, which should be the first.