Cubbie station goes to China for 'a steal'

AUSTRALIA'S most valuable farm, Cubbie station, has become majority foreign-owned.

Cubbie Station

AUSTRALIA'S most valuable farm, Cubbie station, has become majority foreign-owned as its former chairman questioned whether the vast cotton growing concern was a "steal" for Chinese investors.

The sale, reportedly for about $240 million, settled last night, ending years of controversy over the fate of the irrigation operation that straddles the headwaters of the Murray-Darling river system in southwest Queensland.

A spokesman for new owners CS Agriculture, a consortium bankrolled mainly by Chinese textile-maker Shandong RuYi, confirmed the sale had gone through on the eve of Australia Day.

Nationals Senate leader Barnaby Joyce described it as "bitterly disappointing".

"I think it is indicative of the general plight of rural Australia that we have created an environment where it's really difficult for domestic agriculture to advance in this country," he said.

"It's easier for a foreign investor to make a go of it."

Outgoing Cubbie chairman and former Queensland treasurer Keith De Lacy said the operation had turned the corner when a 12-year drought broke soon after voluntary administrators were called in in 2009. At the time, the business had debts of about $320m.

By 2010-11, the 96,000ha farm was producing cotton and cotton seed that earned $80m before interest and tax.

"If they got it for $240m, they have got a steal, considering it's an enterprise that is capable of producing a gross profit of $80m a year," Mr De Lacy told The Weekend Australian.

He said the previous management had always believed Cubbie could have traded its way out of its problems, but he admitted the operation had run up too much debt and was caught when the drought lasted longer than it had banked on.

"I think in agricultural enterprises the operators have to be very conscious of weather and commodity cycles," Mr De Lacy said. "You have to live with those and therefore they won't sustain high gearing.

"We budgeted on a 10-year cycle, which I think is necessary, but were caught out by a drought that went on longer than anything in our records.

"On reflection, I would go into those things with an even stronger balance sheet -- in other words, with less gearing."

Australian minority shareholder the Lempriere Group, a family-owned wool processor and trader, will operate and manage the farm in line with the foreign investment approval issued by Wayne Swan four months ago.

The firm has since guaranteed the on-site management team would remain in place, along with Cubbie's existing contracts to gin its cotton crop in Australia.

Senator Joyce, who lives at nearby St George, said he would keep tabs on whether the new owners lived up to promises made to staff and local contractors that it would be business as usual.

Under the terms of the foreign investment deal ticked off by the Treasurer, RuYi agreed to reduced its 80 per cent stake in Cubbie to no more than 51 per cent in three years; Senator Joyce said this needed to be watched carefully to ensure it wasn't "a nominal sell-off" to an entity associated with the Chinese firm.

He cited concern with the potential for Cubbie to sell direct to RuYi mills in China and Japan, bypassing Australian market channels. "Obviously, if the Australian economy is not getting any benefit from it, the question has to be asked, is that . . . contrary to the national interest," Senator Joyce said.

Asked whether he would seek to revisit the terms of the foreign investment conditions if the Coalition won the next federal election, he said: "What else can I do? It settles today".

Mr De Lacy said he supported foreign investment in farming because the future of Australian agriculture depended on it. "The important thing is that Cubbie prospers and now they have a strong balance sheet I don't think people in the region will notice much difference.

"Cubbie won't change . . . I don't think Cubbie is the kind of operation that you can come off the street and run. You need the expertise that been developed there over the years."

Cubbie's dams stretch for more than 28km near the town of Dirranbandi, just north of the NSW border, and irrigate more than 130sq km of cropland. During the last drought, it drew intense criticism from downstream irrigators, who accused Cubbie of destroying river flows, an accusation denied by the management and the Queensland government.