Continental CONNECTIONS

Europe Business Review, Oct-Dec, 1999

Business links between Australia and the EU are growing faster and wider, with new deals being arranged or planned right across the economic spectrum.

Finance, retailing, media, logistics, tourism and investment are among the sectors involved in the latest agreements. They are taking place in the context of EU's strengthening its position as Australia's largest single overall economic partner.

Among the recent moves:

To extend its global reach, Logistics Bureau, a Sydney-based management consultancy, has arranged an affiliation with the European consultancy Logistics Consulting Partners (LCP).

Logistics Bureau Director Rob O'Byrne and LCP Director Professor Martin Christopher signed the deal in Sydney.

LCP is Europe's leading independent management consultancy specialising in supply chain management and logistics. Its major clients include British Airways, DuPont, Ericsson, Hewlett Packard, Microsoft, and Xerox.

O'Byrne says his company had an Australian and South-East Asian focus now but by becoming an affiliated company of LCP it can get more access to Europe.

Spanish publisher Francesco Javier Moll, who owns 11 provincial newspapers in Spain, plans to establish a broadsheet in Adelaide.

Mr Moll has property in South Australia, including the former Adelaide Stock Exchange building, several city buildings, and a vineyard in the Barossa Valley.

Foreign entities are limited to owning no more than 20 percent of any Australian newspaper. Decisions on the sector are made by the Foreign Investment Review Board.

Thomson-CSF of France and Australian engineering group Transfield are bidding to acquire Australian Defence Industries, a government-owned defence and electronics enterprise.

"ADI is competitive, diverse and capable. The joint venture aims to expand it into other defence and civil areas, including access to export markets via the networks of Thomson-CSF and Transfield," says Gilbert Dangleterre, Sydney-based CEO of Thomson-CSF Pacific.

Transfield is Australia's leading engineering and infrastructure developer and previously operated Australia's largest naval shipbuilding facility. Thomson-CSF is one of the biggest defence contractors in the world and has been established in Australia for more than ten years.

UBS Capital, the private equity division of Swiss banker UBS, plans to enter the growing private equity financing market in Australia.

Typically UBS Capital takes a strategic stake for each investment of between A$25 million and A$60 million, although the deal size can be larger with leveraging.

"With our global network and expertise, UBS can offer strategic financial partnerships," says David Lai, Singapore-based regional head of Asia-Pacific for UBS Capital.

He says that there is growing European interest and activity in the Australian market for private equity funding. Australian banker David Jones will be the Sydney-based executive director of the Swiss financier in Australia.

Qeensland will host the 1999 annual "travel academy" of one of Germany's largest tour wholesalers, Deutsches Reiseburo (DER).

DER is also the official German Olympic tour wholesaler for the Olympic Games starting in Sydney in September next year.

Queensland won the right to hold the conference - known as Reiseakademie - against competition from Hong Kong and Brazil.

About 700 of DER's leading travel consultants, from over 7000 travel agencies throughout Germany, will spend 10 days in Australia in November.

The German supermarket operator Aldi is seeking up to 50 sites around Sydney. Aldi, a family-owned firm, has specified that it does not seek joint developments in retailing.

The Aldi initiative could cost up to A$350 million, based on average cost of the type and amount of retail space it needs.

Aldi has several thousand stores across Europe and 230 in UK. Its stores stock about 500 to 700 lines and compete fiercely on price. By comparison, Coles and Woolworths, the main Australian supermarket chains, each carry more than 20,000 lines.

Several analysts said Aldi may have trouble finding enough suitable sites around Sydney but could buy existing stores and convert them. The Australian government is encouraging more competition among retail networks.

Simeon Wines, a listed Australian winemaker, is negotiating with European groups for distribution, acquisitions and joint ventures. Simeon, in which French-owned Orlando Wyndham has a stake, exports about 20 percent of its sales which totalled $98 million in 1998-99.

Strong earnings from Europe helped a 16.3 percent rise in annual profit for Brambles, the Australian logistics, waste management and equipment hire company.

Its European profits helped offset lower local sales. The company made a profit of $330 million for the 12 months to June 1999. Pre-tax earnings in Europe increased 30 percent and amounted to $222 million. The company had total revenues of $4.7 billion.

Brambles is exploring a joint venture involving the Eurotainer business to add to its European rail wagon rental network.

The Italian-owned dairy company Parmalat has made a $676 million offer to merge with the NSW-based co-operative, Dairy Farmers Group. Parmalat is offering to sell its Australian business, headquartered in Brisbane, into Dairy Farmers. The plan needs approval by the Foreign Investment Review Board.