Japanese suitor circles Harvey Beef

A company backed by Japanese giant Marubeni has emerged as the frontrunner to buy historic agribusiness Harvey Beef.

WA's biggest beef producer and exporter is understood to be on the market for more than $40 million, and industry sources say Japanese company S Foods is closing in on a purchase.

The deal would give S Foods, already a major importer of Australian beef, control of a state-of-the-art plant in the South West that processes about 145,000 grass and grain-fed cattle each year.

One of Asia's biggest private equity funds, Pacific Alliance Group, is the ultimate owner of Harvey Beef and has signalled to industry stakeholders that it wants to sell the meatworks.

Industry sources said PAG might also try to sell Queensland's Kilcoy Pastoral Co, which has a processing capacity of 285,000 cattle a year and employs 750 staff. It was unclear last nigh if S Foods had discussed buying Harvey Beef as well as Kilcoy, which is 20 per cent owned by cash-strapped Elders.

Marubeni has a big stake in S Foods and the two companies are affiliates in meat supply chains.

Marubeni's string of assets in Australia include Rangers Valley in NSW, which it purchased in 1988 and developed into a premium marbled beef producer.

The Rangers Valley feedlot is one of the biggest in Australia with a capacity of 32,000 head. Its biggest customer is S Foods.

Harvey Beef chief executive Michael Hughes yesterday declined to comment on S Foods or the likelihood of a sale.

Harvey Beef has about 300 staff and exports 70 per cent of its beef products, much of it to Japan, Korea, Indonesia and Taiwan.

Financial statements lodged with the Australian Securities and Investments Commission two months ago state that Harvey Industries Group, which operates Harvey Beef, had revenue of $145.8 million in the 2012 calendar year, up 8.4 per cent, for a gross profit of $12.2 million, down 18.6 per cent. Its after-tax loss of $9.3 million compared with a $1.7 million loss in 2011. HIG forecast better gross profits this and next year based on improved cattle volumes and lower supply prices.

Harvey Beef, founded in 1919, has had a rocky ride over the past decade. In 2009, a build-up of stock during a downturn in demand forced it to suspend operations, stand down 500 staff and cut salaries in a bid to keep the business afloat. In the same year, part-owners Elders and London-based Stark Investments sold their stakes to fellow shareholder Harmony. PAG bought Harmony last year.