Rumored to be in the works on and off since November of 2014, and following news at the end of January from multiple sources that the sale of A$1 billion cattle business Consolidated Pastoral Company (CPC) by UK private equity firm Terra Firma was imminent, GAI News has confirmed that the two-stage auction is underway. Financial Review reported earlier this year that lead bidders for CPC are expected to include both Australian and foreign institutional investors and “industry and strategic players”.
Consolidated Pastoral Company owns and operates a portfolio of 16 cattle stations with a carrying capacity of 400,000 head of cattle across 5.5m hectares of land in Australia. The company also holds an 80 percent interest in Juang Jaya Abdi Alam (JJAA), which owns and operates two feedlots in Indonesia.
Significant Interest in Australian Agriculture
The sale comes at an opportune time for both Terra Firma and potential bidders. After a banner 2016-2017, which saw agriculture as the largest contributor to Australian GDP growth and record levels of farm production, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) is forecasting a return towards mean for 2018. The longer term outlook over the next five years calls for a steady rise in demand driven by income and population growth in markets targeted by Australian exporters. CPC is an exporting powerhouse, with its direct sales channels primarily involving the sale of cattle and beef to Asian consumer markets, domestic feedlots or exporting processors, and exporting live cattle.
The amount and quality of land involved in the deal also opens up a number of strategic options for potential buyers. In a Global AgInvesting Europe 2017 presentation on the key risks and effects on farmland returns, David Sackett, managing director, Growth Farms Australia, highlighted the need for investors in Australian pastoral assets to focus on properties that bring the potential for optionality if the markets change. With over 5.5m hectares of land across Australia, the new owners will have plenty of opportunity to expand cattle operations or introduce other options in response to market and climate fluctuations.
By David Nitchman, GAI Media