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My letter on Wellard published by AFR

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Wellard never in the running

Aaron Patrick must be lauded for a well written analysis ("Cattle IPO burned investors", September 19).

The economic rationale of a business that imported ships from China to help export cattle to Asia and the Middle East should have been questioned at IPO. Having spent decades in the latter two regions I know that a predominant quantity of meat imported in these regions is among the cheapest in the world, while Australian products can compete on quality but not on price.

A case in point is Saudi government investor Salic's acquisition of a 20 per cent stake in Brazil's beef producer Minerva for $US188 million. Wellard cannot match the low costs of the likes of Minerva.

The monetisation of family equity in Wellard at the cost of investors is followed by the sale of the personal home of its chief executive and the largest shareholder, who now wants to leave Australia. The sequence of events looks made for the plot of an unimaginative financial crime thriller. Regulators may do well to investigate the actions of Mauro Balzarini as the person in Wellard's management control pre and post IPO. Shareholders may especially want Wellard's unusually large capital expenditure on a Chinese ship investigated for any moral leakages.

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I wish the AFR had run a pre-IPO story challenging Wellard's capital market debut on the issues of governance, business strategy and pricing, a job that cannot be expected of mainstream equity analysts who must support the IPOs their banking colleagues run.

Chetan Shah
Waitara, NSW


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