Narrative
Full Description
Project narrative
In late 2015, Chinese businessman Lu Xianfeng, a major shareholder of Chinese publicly-traded firm Ningbo Xianfeng New Materials, entered into an agreement to purchase Australian dairy Van Diemen’s Land Company (VDL) for $280 million AUD ($200 million USD). Lu established Australian company Moon Lake Investments Pty Ltd, to purchase the dairy from its owner, Taranaki Investment Management Ltd, the investment arm of New Zealand's New Plymouth District Council. To support this acquisition, in 2016, the Industrial and Commercial Bank of China (ICBC) issued a $74 million USD loan to Kaixin Investment, a Ningbo-based special purpose vehicle established by Lu, for the acquisition. Ningbo Xianfeng issued a guarantee in support of this loan. The guarantee was supported by a pledge of security (collateral) of all of VDL's assets. In addition to ICBC's $74 million USD, China Zheshang Bank (CZB) lent $22 million USD and Rabobank's Australia unit lent $56 million USD; these loans were also secured by the dairy farm's assets and received guarantees from Ningbo Xianfeng. Lu also sought other funding to support the purchase; he pledged 95% of his owned shares in Ningbo Xianfeng to serve as collateral for other Chinese loans. In January 2016, a Tasmanian businesswoman attempted to underwrite a rival bid for VDL to put into Australian hands, but was unsuccessful. TasFoods Ltd., on the other hand, entered into legal action arguing it was overlooked as a potential buyer; it was awarded $1.25 million AUD in an out-of-court settlement. In February 2016, Australia’s Foreign Investment Review Board (FIRB) approved the transaction. The acquisition was then completed in late March 2016. At the time of the purchase, Tasmania-based VDL was Australia's largest dairy, milking 17,890 cows over 7,062 hectares in northwest Tasmania, including the historic Woolnorth property. VDL was established during the British colonization of Tasmania in the 1800s and has been recognized as the "most prestigious" dairy in Australia. Lu promised to invest $100 million AUD into the dairy, preserve its existing 140 jobs, and create up to an additional 95, and export its milk to China. Lu also tapped former Australian politician David Crean as deputy chairman of Moon Lake Investments and pledged to respect and honor the cultural heritage of the area's Aboriginals. Despite FIRB's approval and Lu's pledge, this purchase fell under heavy controversy. In the Chinese press, Lu was known to have severe financial problems with his companies. After the purchase in March 2016, Lu attempted to sell the dairy to Ningbo Xianfeng to pay off the Chinese loans; however, the China Securities Regulatory Commission barred that transaction, pointing to “uncertain” future profits from the dairy, due to declining earnings by a global decline in milk prices. It was later discovered that the Chinese loans had not been presented to FIRB. Lu's lack of experience in agriculture was also noted as a potential issue. The approval of the acquisition despite the issues with Lu drew criticism from Australian academics and the press. Scott Morrison, at the time treasurer and later-prime minister, gave the sign-off on the FIRB approval; he later fell under criticism from Tasmanian politicians for allowing the deal to go through. Concerns about the financial issues, environmental damage, and ICBC potentially seizing the VDL properties (perceived to be giving the Chinese Government influence in environmentally sensitive region) also drew concern from Australian politicians. Additionally, VDL itself experienced significant problems post-acquisition. The sale price of $280 million AUD, lowered to reflect an expected decline in milk price in 2016 that did not happen, led to New Zealand's New Plymouth District Council to go to Australian court to recover those funds. In April 2018, VDL's five-member board resigned en masse over the dairy's governance and risk management, and its chief executive officer declined to renew his contract. By 2019, Lu had taken over daily management of the company and served as both chairman and CEO. In 2019, senior management at VDL wrote a letter to Lu raising concerns about animal welfare and safety concerns at the dairy, alleging insufficient investment in infrastructure and machinery, and poor conditions at laneways, and seeking indemnity for loss or damage to due the concerns. In October 2019, Rabobank tasked CBRE with valuing the company. By October 2020, there were claims the dairy was on the precipice of being sold. In May 2021, Lu sold 12 farms owned by Van Dairy (VDL's/Moon Lake's new name) for $60 million AUD.