VICTORIAN lamb and beef processor Woodward Foods has completed a deal to sell a 49 percent minority shareholding in the diversified business to a substantial Hong Kong-based Chinese investor.
The completion of the deal recently, following FIRB approval, will provide a capital base for Woodward Foods to embark on an expansion plan for sheep meat and beef production, targeted primarily at export into China.
Taking a strategic stake in the business is family-owned Hairun Food Investment Holdings (HKH), a Hong Kong-based company which owns and operates extensive logistics and cold store operations in mainland China. Hairun also owns port facilities in Shantou and distribution networks in greater China, along with other large construction and industrial businesses in Singapore and China.
While Hairun already trades in imported red meat from other parts of the world, the Woodward deal is its first direct investment in the red meat industry.
The size of the investment was not disclosed, but a source close to the deal suggested Hairun’s 49pc stake in the business was worth well over $50 million.
Woodward and Hairun started discussions over the deal three years ago, “to ensure that both companies shared a common vision and commitment to achieve the long-term growth objectives of Woodward Foods,” principal and company founder Robert Woodward told Beef Central.
Australian-based red meat deal-maker Eddie Zhi is understood to have been involved in the formation of the relationship.
The joint venture deal includes Woodward Foods’ Swan Hill export-licensed beef, lamb and goat meat abattoir; its Garrison commercial feedlot near Swan Hill; a large domestic wholesale and export business; and a backgrounding property. The Woodward family will retain other properties used for backgrounding and growing cattle and sheep for the supply chain.
Woodward Foods Australia, previously RH Woodward, has been operating in Swan Hill for more than 30 years under the trading name Swan Hill Abattoirs. The business was founded by Robert Woodward, effectively merging three small local slaughter houses into one.
Move to export a catalyst
The abattoir has undergone significant expansion in the past five years. Cattle throughput numbers are currently around 300 daily, plus 2500 sheep and lambs, producing around 5000 cartons of red meat a day.
Upgrades to infrastructure and management allowed the company to achieve Tier 2 export accreditation four years ago. Since then Woodward has made solid inroads in export of branded MSA-backed lamb and goat meat to the US, and beef is also expanding into North America. The company has China export approval pending, following some changes to carton conveyor systems, which was obviously a key attraction for the new shareholder.
Capital injection paves way to expansion
Robert Woodward said the capital injection would allow the business to expand, with plans to build a stand-alone beef shed with capacity to do 500 head per shift, allowing the existing facility to grow sheep numbers to 4000 per day. He hoped capacity expansion work might start within 12 months, having this year installed new plate freezers in the cold room complex – a significant capital expense.
Asked whether Hairun was a good fit for the Woodward business in seeking an equity partner, Mr Woodward said the two had been “taking a good hard look at one another for three years.”
“They’re a family company and we have a lot in common. The only fault I can find with them is that the boss and his son can’t speak English,” he quipped. “Other than language, we’ve got a lot of common ground and work well together,” he said.
Still ‘early days’ in China
“Despite the recent boom in trade that’s occurred, we think it is still very early days for China, so far as Australia’s red meat industry goes,” he said.
“Many Chinese are only now acquiring a taste for red meat for the first time. We think we have timed our alliance with Hairun at exactly the right time.”
Mr Woodward said he had first travelled to Hairun’s head office city of Shantou in 2000 to sell a million sheep skins (to other customers – not Hairun). Shantou was still somewhat backward then, he said, but it had changed dramatically in the past 19 years and was now an ultra-modern, bustling city.
Mr Woodward said the company’s future plans for export to China would not occur at the expense of its existing domestic wholesale trade or other exports, but would come through production growth.
The company’s domestic wholesale business, (its name is currently in transition from Murray Valley Meat Co to Woodward Foods), is one of Australia’s largest independent meat wholesalers, with distribution hubs in Brisbane, Sydney, Adelaide and Swan Hill. The Sydney depot alone services some 550 customers for beef and lamb, and the company is also about to open a new depot in Melbourne.
Robert Woodward cut his teeth with a livestock trading operation, selling up to 1000 cattle a week in season to Homebush yards in Melbourne. He also owned and operated Leopold Downs and Fairfield in the Kimberley for some years in the 1970s-80s, before buying Swan Hill abattoir in 1989. The business has grown over the past 30 years to become one of Australia’s largest fully vertically integrated meat operations.
A source told Sheep Central that Woodward’s new investor, Hairun, may be shaping to float its business on the Hong Kong or Chinese stock exchange at some time in the not too distant future.