CK Life Sciences pays HK$260m for vineyards

CK Life Sciences is to diversify from the development and sale of agricultural-based nutritional and pharmaceutical products into the business of owning vineyards.

The Hong Kong-listed bio-technology company announced yesterday it had agreed to buy a majority stake in Australian-listed Challenger Wine Trust for HK$260 million.

CWT is a managed investment trust that is the second-largest vineyard owner in Australasia. It has a portfolio of over 5,000 hectares of land, comprising 20 vineyards, two wineries and various water rights in Australia and New Zealand. Some well-established producers such as Foster's, Pernod Ricard Pacific, and Australia Vintage are lessees.

The wine industry in Australasia has gone through a difficult time due to an over-supply of grapes, which saw harvest prices falling by 35 per cent in Australia and 40 per cent in New Zealand over the past two years. Stronger currencies in Australasia also dented wine companies' earnings, given that around 63 per cent of the wine production in Australia and 65 per cent of production in New Zealand is for export markets.

The falling grape price has depressed valuations of vineyards in the countries and prompted a consolidation in the industry and some fallouts. Challenger Wine Trust reported a A$14.7 million (HK$115.06 million) net loss in the 12 months ended June this year, compared with a A$24.3 million loss a year earlier, due to asset value depreciation and revaluation on property prices.

The operating profit of the company amounted to A$15.16 million if the impact of property revaluation is disregarded.

'The Australian wine industry is going through a depressed state and consolidation is taking place. It is this situation which presents an opportunity for CK Life Sciences to participate in the vineyard industry,' said Kam Hing-lam, president and chief executive of CK Life. 'We see bright long-term prospects for CWT.'