Australia is about to see its first poultry company float on the stock exchange in decades.
U.S.-based private equity firm, TPG Capital Management is set to list Inghams Group, Australia’s largest poultry producer on the ASX next month at a value set between $1.33 billion and $1.53 billion, and with an enterprise value of between $1.7 billion and $1.9 billion reports The Australian.
TPG plans to sell between 50 and 70 percent of the poultry company at a per share price of between $3.57 and $4.14 with a goal to raise between $767.6 million and $1.12 billion. At this valuation, Ingham’s float will be priced at 13.5 times to 15.5 times its forecast profit. If accomplished, this float would be the biggest in Australia in 2016 to date.
It is also being reported that AustralianSuper, one of the country’s giant superannuation funds with more than $100 billion in investments, has pre-committed to buy a stake in Inghams valued at up to $150 million through the IPO. Considering AustralianSuper’s pre-commitment, combined with the fact that TPG plans to retain a stake in Ingham’s of between 25 and 40 percent, AFR reports that the Inghams IPO will offer $900 million in stock for purchase by institutional and retail investors.
A Position of Strength
Although Australia does not export a sizeable amount of poultry, Reuters reports that Inghams has seen record profits this year stemming from healthy growth in Australia’s domestic market. Chicken consumption has climbed 4.1 percent between 1990 and 2015 as consumers perceive it to be a healthy food option. Indeed, in fiscal year 2015 alone, Australian consumers ate 1,144 million tons of chicken – the bulk of which was domestically produced, as the country’s strict biosecurity laws pose challenges to importing poultry. Additionally, the country’s poultry market has been boosted by drought cutting its cattle herd to its lowest numbers in 20 years. The cut to supply resulted in higher prices for red meat and consumers opting for poultry – all factors that have placed Inghams in a position of strength with expectations of $2.4 billion in revenue for the 2017 fiscal year.
Awaiting an IPO
Founded in 1918 and bought by TPG in 2014 from the Inghams family for nearly $900 million, it was announced in November of that year that Charter Hall Group confirmed the purchase of six select Ingham poultry assets for $171.4 million on behalf of three of its funds – Core Logistics Partnership, Direct Industrial Fund, and Core Plus Industrial Fund. This purchase marked the completion of the sale and leaseback by TPG of Ingham’s extensive portfolio of poultry assets and raised its earnings from the sales to $550 million.
Once the portfolio sale and leaseback which included processing plants, feed mills, breeder farms, and hatcheries was completed, the industry began harboring expectations of a possible float or trade sale for the poultry giant.
Currently, Inghams has completed the first year of its five-year restructuring plan, which is designed to integrate operational and organizational streamlining that brokers estimate will result in between $160 million and $200 million of gross EBITDA throughout supply chain management, procurement, labor, automation and network configuration according to AFR, which goes on to explain that this activity has led Inghams to be framed as a “margin expansion story” to institutional investors through pre-marketing efforts.
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Lynda Kiernan