Chinese billionaire Xianfeng Lu has put one of the country’s biggest dairy operations, the nearly 200-year-old Woolnorth farming aggregation in Tasmania, up for sale after losing a big milk supply contract with dairy giant Fonterra earlier this year.
The businessman paid $280 million in 2016 to acquire the Van Diemen’s Land Company and its dairies at Circular Head on the north-western tip of the island.
At the time of his purchase from New Zealand’s Tasman Agriculture, VDL was the largest single supplier of milk in Australia, milking almost 18,000 cows and producing about 7.66 million kilograms of milk solids.
In February this year, Fonterra cancelled a 25-million-litre milk contract with Van Dairy citing “unresolvable commercial factors”. Following this, Van Dairy sent 700 cows to be slaughtered.
Mr Lu said in a statement that “with disappointment” he was placing Van Dairy’s remaining land holdings on the market “in anticipation of the expiration of our long-term milk supply agreement”.
The listing of Woolnorth comprises 9500ha of farmland including 4207ha of dairy area. That’s about half the size of the property – around 19,000ha – when Mr Lu’s Moon Lake Investments (now called Van Dairy) acquired VDL in 2016.
Most of the downsizing occurred in 2021 when Van Dairy sold 11 dairy farms – around 2200ha in total – and 5000 cows for $62.5 million to Melbourne-based fund manager Prime Value.
That same year, Van Dairy sold another 6000ha of farmland to Angus cattle breeder, Tim Roberts-Thomson for $120 million, while just last month Van Dairy sold a 700ha farm to Prime Value’s dairy fund for $15 million.
The sale of the remainder of Woolnorth is being handled by Tony Maguire and Brad Davies from Nutrien Harcourts.
No price guide has been provided.
According to Rural Bank’s 2023 Australian Farmland Values Report, the median price of a hectare of farmland in North West Tasmania was just under $26,000 in 2022. Prime Dairy’s 700ha acquisition last month was struck at $21,400 a hectare, but included livestock.
The Woolnorth offering includes a large water entitlement of over 10,300 megalitres and extensive infrastructure including a homestead block with seven homes and a director’s lodge, eight rotary dairies, a large workers’ accommodation block and numerous outbuildings and sheds.
The successful purchaser will also have the first right to acquire all Van Dairy’s remaining livestock and machinery, the Van Diemen’s Land Company name and archives and grazing leases on two wind farms.
Mr Lu controversially took ownership of VDL – a company established in 1825 by King George IV to supply wool to Britain– after his Moon Lake Investments gazumped a $250 million bid to acquire the dairy farms by ASX-listed Tasfoods.
The deal required the approval of then-federal treasurer Scott Morrison.
However, Mr Lu acquisition was mired in controversy from the very start.
In August 2017, the Financial Review revealed that Mr Lu had been looking to sell his holding in VDL to a Chinese-listed vehicle he controlled – even before settling the purchase in 2016.
The plan, which would have raised cash via a share sale and taken some pressure off Mr Lu’s debt-funded acquisition of VDL, was blocked by China’s sharemarket regulator.
Then in 2021, Van Dairy was issued with environment protection notices and had an operating licence suspended because of overflowing effluent systems.
The Age also reported at the time that Van Dairy was being investigated by the Fair Work Ombudsman following claims of worker underpayment and work compliance breaches.
During his eight years of ownership Mr Lu said his company had employed “hundreds of locals, invested tens of millions of dollars into our farm, and returned huge flow-on benefits to the local economy”.
“Since 2016, I have been proud to partner with the local community to build a successful dairy farming operation,” he said.
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