China's big avocado farm purchase in question

A Chinese company has told the Shenzhen stock exchange it is close to buying Australia’s biggest avocado farm.

Jasper Farms at Busselton in Western Australia.

A large Chinese pig, poultry and stockfeed company, Shenzhen Kondarl, has told the Shenzhen stock exchange it is close to finalising the purchase of Australia’s biggest avocado farm for as much as a billion Chinese yuan ($192 million).

But Neil Delroy, the Australian owner of Jasper Farms at Busselton, Western Australia, told The Australian yesterday that no deal had been done.

He confirmed his two highly productive avocado farms were being offered to both overseas and local investors by Ernst & Young — who last year sold the Kidman cattle empire for $380 million to a Gina Rinehart-Shanghai CRED joint venture — but said he was mystified by Shenzhen Kondarl’s purchase announcement.

Mr Delroy, who produces between 4500-6000 tonnes of Haas avocados annually and is Australia’s biggest individual grower, said no memorandum of understanding for the sale had been signed with the Chinese company, that the asking price was a little lower and that prospective Australian bidders remained in the race.

It is thought the premature Shenzhen Kondarl announcement may have been made to signal to its investors that it had obtained permission from Chinese authorities to spend a billion yuan buying an asset or business outside China.

The flood of money leaving China — whether to buy overseas companies, homes or farms — has led to the Chinese government introducing new regulations requiring approval before any company takes funds out of China to buy an overseas asset, such as Mr Delroy’s Jasper Farms.

Such a large farm purchase — if it is finalised — would also require approval from Australia’s Foreign Investment Review Board and Treasurer Scott Morrison.

Mr Delroy admitted he was annoyed by the Chinese pronouncement, which has also caused confusion for his brother Russell Delroy.

Russell Delroy farms avocados separately to his brother Neil, mainly around the Pemberton region in Western Australia, under the trading name Delroy Orchards, and also operates a separate packing and wholesaling business, including interstate cold stores, that supplies 25 per cent of Coles supermarkets’ avocado demand.

Despite Shenzhen Kondarl claiming it had bought the “Delroy family” avocado business, Mr Russell Delroy clarified yesterday that his own Delroy Orchards was not for sale, only his brother’s Jasper Farms.

The two farms up for sale include 220 hectares of avocado orchards containing 82,000 trees, plus another 240 hectares of young trees just reaching maturity.

Neil Delroy, 59, said his farms were highly productive, producing better yields than almost all other avocado growers and he said he was at an age when he wanted to work less.

He said his decision to sell had been driven by an unsolicited offer two years ago, which had made him decide to get Jasper Farms properly valued and in shape for a potential sale.

The little known — outside avocado circles — Delroy brothers are known for “flying below the radar”, given they are now the biggest producers of avocados in Australia.

“We don’t like having a high profile; we just paddle along and do our own thing,” Russell Delroy said.

“I learnt the hard way that you never want to be a small player in a big industry; that it’s always better to be a big player in a smaller industry with control of enough product to deal directly with the retailers, from the independents through to the majors.”

The stock exchange-listed Shenzhen Kondarl group has not made any previous forays into Australia agriculture and does not appear to have a prior major interest in horticulture.

Neil Delroy said officials from the Chinese company had visited his avocado farms twice. Founded in 1979 and based in Shenzhen, Shenzhen Kondarl is a former property development company that has come to specialise in agriculture, owning farming, feed and agricultural products businesses in China.

It breeds its own pigs, chickens, ducks and fish and sells pork and eggs to major retailers.

It is also a water supply company in some parts of southern China and recently established a chain of fresh food supermarkets called “City Farms”.

In 2013, Shenzhen Kondarl established a special agricultural supply chain subsidiary with a reserve fund of 100 billion yuan to invest in buying agricultural assets and farms. It said locking in the supply of fresh food for its new retail shops was to become the cornerstone of the company’s future growth and expansion.