furniture and homeware retailer harvey norman moves into dairy farming 2067482015
The retailer’s notice to the ASX gives no rationale for the deal
Harvey Norman Holdings Limited (ASX:HVN) said Wednesday that it had acquired a 49.9 per cent stake in dairy Coomboona Holdings Pty Limited for AU$34 million, of which AU$9 million would be paid up front.
“Coomboona, through wholly-owned subsidiaries, owns land and farm assets in the Coomboona district of the Goulburn Valley region in Northern Victoria,” the company’s ASX release said. “The business of Coomboona includes dairy farm operations and a pedigree breeding and genetics division.”
The release did not provide any justification for the acquisition, though Coomboona Holdings is one of Australia’s largest dairy farms.
Billionaire Gerry Harvey, who founded Harvey Norman and is currently its chairman as well as a major shareholder, has been a long-time investor in agriculture in his personal capacity. According to the AFR, he owns horse studs, the Magic Millions horse sales business and a beef business called Security Foods.
His decision to go into the dairy business echoes the recent move into the agriculture business by Gina Rinehart, Australia’s richest person, who invested AU$500 million in a business that will provide infant milk formula for China. Mining billionaire Andrew Forrest, of Fortescue Metals Group Limited (ASX:FMG) fame, acquired leases to the Brickhouse and Minilya cattle stations, according to the West Australian, and now owns pastoral land holdings in Western Australia of over a million hectares. Harvey Beef, which Mr Forrest acquired in 2014, processes over 130,000 head of cattle annually.
Speaking to The Australian, Mr Harvey shed some light on the dairy transaction. “We have looked into this across the world in terms of what’s happening in dairy, and everyone has got a cappuccino in their hand all day, every day.”
Even though retailer Harvey Norman said last week that its annual net profit 2015 jumped 27 per cent to AU$268.1 million, some of that net profit was boosted by property revaluations. Times are tough in the retail space, judging from recent developments at Woolworths Limited (ASX:WOW) and Myer Holdings Ltd (ASX:MYR). Profits slipped 12.5 per cent at Woolworths and the retailer replaced its chairman. Struggling Myer may potentially close 20 per cent of its store footprint to cut costs after its statutory profits for 2015 slid 70 per cent to AU$29.8 million.
Mr Harvey said to The Australian that the decision to move into dairy was an offshoot of the tough times in the retailing sector.
"You have got to look around to try to find out where you can put your money and try and make some money. It's not that bloody easy," he said.
Shares in Harvey Norman Holdings Limited (ASX:HVN) closed Wednesday at AU$4.17, down 3.25 per cent.
