Deputy Prime Minister and Treasurer
3 December 2007 - 27 June 2013
Foreign Investment Decision
I have approved the joint proposal by Shandong RuYi Scientific & Technological Group Co. Ltd and Lempriere Pty Ltd (collectively, the Consortium) to acquire the assets of Cubbie Group Limited, subject to a number of important undertakings I have sought and obtained from the Consortium in relation to employment, ownership, board composition, management and water use.
Critically, RuYi has undertaken to sell down its interest to no more than 51 per cent within three years.
Following significant financial difficulties, Cubbie Group was placed into voluntary administration three years ago. Since then, a number of attempts have been made to find a buyer for the company. If the Consortium is the successful bidder in the sale process being conducted by Cubbie Group's administrator, the proposal would bring an end to this long period of uncertainty, helping ensure the ongoing operation of Cubbie Group, protecting jobs and supporting economic activity in the Dirranbandi and St George regions.
RuYi is a textile manufacturer owned by a consortium of investors based in both China and Japan.
Lempriere is part of an Australian family-owned group of companies, with a long history and extensive experience in wool trading and in managing agricultural properties across Australia. Consistent with the undertakings, Lempriere will be responsible for operating and managing Cubbie Group, including the marketing and sale of its cotton production in conjunction with the existing management team. All cotton will be sold on arms-length terms in line with international benchmarks and standard market practices.
Initially the Consortium will be owned 80 per cent by RuYi and 20 per cent by Lempriere. However it is not RuYi's long term intention to retain an 80 per cent interest in Cubbie Group.
As part of the proposal, RuYi has therefore undertaken to:
- 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 of completing the proposed acquisition, and investigate the possibility of publicly listing Cubbie Group in order to achieve this sell down.
- Ensure that its board representation remains no more than proportionate to its shareholding following the sell down.
The Consortium has also undertaken to:
- make offers of employment to all existing employees of Cubbie Group and maintain the existing arrangements including entitlements of those employees;
- have Cubbie Group managed and operated by a wholly-owned subsidiary of Lempriere, including the marketing and sale of its cotton production on arms-length terms in line with international benchmarks and standard market practices;
- establish and maintain a Board that consists of six members and includes two independent directors who are Australian residents with relevant commercial and/ or agricultural experience and one director appointed by Lempriere;
- comply with all relevant State and Commonwealth rules and regulations, including those in relation to water management in the Condamine-Balonne river system;
- investigate ways to improve the efficiency of water usage across Cubbie Group's properties, including as part of its crop production; and
- sell any surplus water allocations through the water market, which may include offering water entitlements for sale to the Commonwealth through a competitive tender process.
The proposed acquisition of Cubbie Group will not impact on water management arrangements as Cubbie Group will remain subject to State and Commonwealth rules and regulations. If the proposal proceeds, the Consortium will be able to actively participate in water markets to sell water access rights that are surplus to business requirements.
Water access rights within the Condamine‑Balonne catchment area are managed by the Queensland Government under its Water Resource Plans and Resource Operation Plans. Cubbie Group will be required by Queensland authorities to comply with allocation levels and other conditions stipulated by these plans.
The outcome of the Consortium's proposal is dependent on the administrator's decision following commercial negotiations. In the event the Consortium is successful in acquiring Cubbie Group it will report to the Foreign Investment Review Board every 12 months on its progress on meeting its undertakings.
The Government welcomes foreign investment in Australia and continues to ensure that investments are consistent with Australia's national interest.