China’s Shandong Ruyi exits Cubbie Station as Macquarie takes control of famed cotton property

The sale completes a decade long odyssey which saw the Chinese group pick up the station from administrators before selling out as commodity prices surge.

Cubbie Station, Australia's biggest cotton farm, near Dirranbandi in southern Queensland. Picture: JAMES WAGSTAFF

China’s multi-billion dollar textile giant Shandong Ruyi has finally exited its once controversial holding in Australia’s largest irrigated cotton property Cubbie Station, selling its 51 per cent interest to funds controlled by Macquarie Group.

The Chinese company had a decade long involvement with the station and in its early years of ownership came under political pressure to sell down its long time 80 per cent stake to 51 per cent.

It hit that mark in 2019 when an agricultural fund managed by Macquarie took over a 49 per cent stake.

The Macquarie-led fund has now bought the remaining 51 per cent stake in Cubbie Station, associated properties and cotton ginnery, bringing the fund’s total ownership to 100 per cent.

The sale comes amid a pullback of China’s ambitions in property and corporate Australia, and at a time that also suits Macquarie’s expansion in Australian agriculture.

The 2012 purchase of Cubbie Station by Shandong Ruyi sparked political discord about rising foreign, and in particular Chinese, investment in Australian farmland. Former Labor treasurer Wayne Swan approved the $232m deal on the condition that the Chinese group “sell down its interest in the Cubbie Group from 80 per cent to 51 per cent to an independent third party (or parties) within three years”.

Prime Minister Scott Morrison later extended Ruyi’s deadline by another three years when he was treasurer in 2016.

Cubbie Station is one of the country’s most critical agricultural assets and accounts for about 10 per cent of national cotton output. The 93,000-hectare property near Dirranbandi and St George, on the border of Queensland and NSW, also has valuable licences to store more water than Sydney Harbour.

However, before the Chinese-led purchase Cubbie Group had languished and fell into administration in 2009 with debts of about $300m.

Shandong Ruyi initially took an 80 per cent stake when its acquisition was finally approved in 2012, with Melbourne-based family company Lempriere holding the remaining 20 per cent interest. By 2016, the Chinese owners had absorbed Lempriere stake into their business, and Dubbo businessman Roger Fletcher took the remaining 20 per cent stake.

Colliers head of agribusiness, transaction services Rawdon Briggs confirmed his involvement in Shandong Ruyi’s initial sell down in 2019, but declined to comment on the latest sell-off of the company’s remaining interest.

Macquarie Asset Management, which manages the acquiring fund, is one of the country’s top operators in local agriculture and said it “looks forward to continuing Cubbie Ag’s involvement in and support for local communities”.

The company said the ownership change would “not materially change the day‐to‐day operations of Cubbie”. Veteran manager Paul Brimblecombe will continue as chief executive of Cubbie, and staffing remains unchanged.

The now full owners said there would also be no change to the Voluntary Water Contribution that was announced when the Macquarie fund acquired its initial interest and the area’s environment has since been transformed.

When the 2019 sale was announced the new joint-owners committed to supporting the Northern Murray Darling Basin, with a voluntary contribution of up to 10GL to the Culgoa River and Lower Balonne intersecting streams.

Ruyi and Macquarie said at the time that the 10GL would “increase the volume of water in the river at critical times and help deliver a range of community and environmental outcomes.

Cubbie’s three properties are near Dirranbandi and St George in south west Queensland and span 93,700 hectares, including 22,100 hectares of irrigated cropping.

The last time before the 2019 deal that Cubbie took water from the river system was in April 2017 when it drew 14GL, or about 9 per cent of the 156GL that passed through St George.

After the Ruyi-led consortium bought Cubbie Station in 2012 for $232m it poured more than $26m into maintaining and improving the efficiency of Cubbie’s operations and put more than $25m buying and upgrading the Dirranbandi ginnery, and also funded major low-season maintenance programs.

The Chinese parent group has been under financial pressure.

Last month, creditors of Shandong Ruyi said the Chinese company had defaulted on a loan used to buy Lycra Co. and that they would seek to gain control of the stretchy-fabric maker.

That move was but the latest financial challenge for Ruyi, the company assembled by textile magnate Qiu Yafu, who had promised to challenge the likes of LVMH Moët Hennessy Louis Vuitton SE as a global luxury conglomerate.

However, after making a series of acquisitions in recent years, Ruyi has been reversing, partly as some creditors sought control of the brands which it bought.

In 2019, the same year it sold down its interest, a shareholder in Shandong Ruyi offloaded just over a quarter of its shareholding to a Chinese government-owned enterprise as its debt woes mounted.

Yinchuan Finance Corporation sold 26 per cent of its shares in Shandong Ruyi to Jining Chengjian Investment Co, an investment arm of the local government of the city of Jinjing in eastern China, for a reported 3.5 billion yuan.

The Cubbie Station investment has paid off for the Chinese group.

Although it is ahead on its purchase after pouring funds into improving the station, it was considered a non-core asset for the group, which had been bidding on more local farms as late as 2018.

Despite some flat periods during drought the property is now coming into a golden era in which cotton prices are at their highest level since 2007.

Macquarie’s purchase is well-timed as cotton price have spiked – doubling since 2019 – and despite challenges by the drought since then Cubbie Station is now receiving heavy water flows after the floods.

The fully-owned Cubbie Station will also be a cornerstone asset of the Macquarie fund, which benefited from good water flows in the wake of its first purchase in mid-2019 and is again set to benefit.

This will flow through to its balance sheet with healthy cashflows coming through as there will be heavy plantings of cotton next year at a time of high prices.