Australian Agricultural Company doubles capital to expand in Asia

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Image credit: freedigitalphotos.com By: [chrisroll]

The country’s biggest landholder and beef producer, Australian Agricultural Company (AACo) called on investors for a $299m capital raising to venture into full-scale meat processing for export in its Asian expansion strategy.

Image courtesy of [chrisroll] \ FreeDigitalPhotos
Image courtesy of [chrisroll] \ FreeDigitalPhotos
“It is quite clear to us that AACo can no longer continue to be just a primary producer,” said AACo chairman Donald McGauchie on The Australian.

According to McGauchie, the cyclical nature of cattle production and high debt levels had restricted AACo’s ability to capitalise on the opportunities presented by growing demand for higher-protein diets in the Asian market.

The whopping double in equity base will fund the development of a $91m abattoir near Darwin, pay down debt to a net of $248 and fund investment to improve returns on its 6.5 million hectare land holdings and 561,000 head of cattle.

AACo claims that its abattoir will be the only one in the region offering an economical solution for other farmers to slaughter stock that otherwise would be left to die. The company is promising to move up the value chain to catch higher and more stable export beef prices.

Just yesterday, The West Australian reported that Indonesia has already confirmed its plan to buy a million hectares of grazing land in the far north of Australia for cattle production as it battles to keep a lid on beef prices, which have skyrocketed under an import quota system introduced as part of a self-sufficiency drive.

Bega Cheese also announced a $320m takeover bid on Wednesday for Warrnambool Cheese & Butter in an ambitious corporate manoeuvre to meet growing demand in Asia as the largest listed dairy producer. $400b China Investment Corporation also looked to take over the country’s biggest milk producer, Van Diemen’s Land.

The flurry of activities in Australian agribusiness is shaping up to be an early test of the Abbott Government’s approach to rising foreign investment. The Coalition has vowed to reduce the threshold for FIRB scrutiny of agriculture land deals from $248 million to $15 million and key Nationals MPs have strongly criticised overseas investment in the sector.

According to Asia Pacific PwC assurance leader Raymund Chao, Australia remains as an attractive destination Asian investment but there was potential “to attract a lot more”, subject to improving relationships in the region.