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Agribusiness M&A activity up, as are PE ratios

AGRIBUSINESS mergers and acquisitions specialists InterFinancial have logged a recent uptick in price-earnings (PE) ratios in the sector.

Through to the end of November, the food and agribusiness sector tracked by InterFinancial and informed by research through S&P Capital IQ, showed multiples had increased over the quarter and reached the 19.5 times PE in November. That is a significant lead over the ASX200 average PE of 17.6x. 

InterFinancial reported significant movement in the food and agribusiness sector that indicate a generally bright 2017.

Australian-based foods business Temptation Bakeries has been sold to a private investor, rumoured to be Bakery Investment Group, owned by Christopher Leach.

Australian superannuation fund Unisuper has invested $150 million to build a 25 percent stake in Taumata Plantations, the New-Zealand timberland business.

Food Revolution Group, an Australian listed consumer foods group, has entered into agreements to acquire fast growing health food business Healthy Warrior and Future Generation Foods for about $48m.

New Zealand-based frozen foods business Leader Foods has been acquired by Patties Foods at an undisclosed value. Leader Foods is believed to have annual revenues of more than $60m.

Australia’s largest cattle group, S. Kidman & Co’s sale has been approved by the Australian Government. The sale, despite fears expressed in the media, represented a significant increase in overall Australian ownership in S. Kidman from 66.1 percent to 74.7 percent.

Any future changes in ownership, including any increase in interest by Shanghai CRED, will require subsequent Foreign Investment Review Board (FIRB) and Federal Treasurer approval. The remainder of the S. Kidman business will be acquired by Australian Outback Beef, which is majority owned 67 percent by Hancock Beef with a minority interest of 33 poercent by Shanghai CRED.

Meanwhile Woolworths reached a deal late last year under which BP Group took control of its fuel retailing operations for $1.8 billion while Woolworths retained its convenience business. Woolworths’ chief executive, Gordon Cairns, said it was time for Woolworths to exit petrol, and focus on innovating in convenience retailing.

 

CVC Limited’s stake in Green’s Foods, the Australian biscuit business, has been acquired by Raphael Geminder has acquired. InterFinancial said Green’s considered a $90m to $120m IPO in 2014. Geminder has not made it known how much was paid for its CVC stake.

InterGrain has received an acquisition proposal from Australian Grain Technologies. The deal would bring together two local plant breeding companies focused on the development and adoption of improved varieties to meet the unique needs of Australian grain growers.

Australian food company Freedom Foods Group will acquire Australian Consolidated Milk’s 50 percent stake in Pactum Dairy Group for $50m. The company will also raise $75m via a 2-for-25 pro rata accelerated non-renounceable entitlement offer and via an institutional placement of new shares.

Australian mining magnate Bill McDonald has sold his entire 80 percent ownership investment in Camperdown Dairy International.

An Australia-based citrus business operating in China, Dongfang Modern Agriculture, has sold a total of 80m shares, or a 20.3 percent stake, to three new investors: Pan Cheung, Wing Nam Florence Fung and Sui Lun Franco Tong.

Jiajiafu Modern Agriculture, an Australia-based vegetable grower with its main business in China, is seeking to raise $5.1m in an IPO in Australia. The company is offering 17m ordinary shares at $0.3 each, and another $3.9m may be raised via oversubscription. The indicative market capitalisation at the offer price will be $29.4m at the maximum subscription.

Pie Face, the Australian fast food chain, is now available for sale. Pie Face recently fell into receivership for the second time in the last two years.

Murray River Organics Group, an Australia-based producer of dried vine fruit, is seeking to raise $35m in an IPO in Australia. The company is offering 26.9m ordinary shares at $1.3- each. The indicative market capitalisation at the offering price will be $113.2m with a total of 87.1m shares on issue.

Archer Capital has appointed a financial advisor to consider exit options for Australian dairy business Brownes Foods. Potential buyers may include Freedom Foods, US-based Dean Foods, Canada’s Saputo, and New Zealand-based a2 Milk. Brownes has an EBITDA of around $15m.

Australian-based grocery business Harris Farm could consider a partial sale to private equity or an IPO. Harris has been courting potential bidders over the last two years but has not had its price expectations met.

Archer Daniels Midland has received pitches from brokers seeking to sell its 19.9 percent stake in Graincorp. Graincorp’s shares are currently trading at $8.86 a piece, which is 2.3 percent higher than its July price of $8.50.

Australia-based bakery business Wild Breads could be available for sale by the 2018 financial year. Wild Breads’ owner, Blue Sky Alternative Investments, is considering the sale of its two-thirds stake in the business. The company could be valued at around $80m. 

E Agri, a privately held Australia-founded hydroponic technology company, is raising capital to invest in the installation of two hydroponic facilities in Australia and China that will enable it to demonstrate its technology. The Singapore-headquartered company is seeking $3m in exchange for a 10 percent stake.

Privately held Melbourne-based artisan caramel producer, Caramelicious, is looking to sell a 30-50 percent stake to potential investors to raise more than $2m. The company is seeking a capital raise to grow locally, as well as to increase exports to Asia and the Middle East.

Privately-held Sydney-based beverage producer, Bondi Beverages, is seeking a strategic investor in the beverage or food space to accelerate growth. It could sell up to an 85 percent stake and is forecasting a turnover of $2.2m.

Accolade Wine’s private equity owner, Champ Private Equity, is expected to decide on IPO by end of January. Champ is expected to raise $600m should it proceed with the float, according to InterFinancial’s report.

www.interfinancial.com.au

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Growers harness precision agriculture in on-farm trials

WESTERN Australia’s South East Premium Wheat Growers Association (SEPWA) – as part of the ‘Do it yourself (DIY) Precision Agriculture’ project funded by the Grains Research and Development Corporation (GRDC) – has published working examples of precision agriculture in practice to assist farmers.

SEPWA’s new publication, Calculating return on investment for on farm trials, contains case studies and examples of how Western Australian growers have used precision agriculture (PA) tools to implement and measure on-farm trials. 

SEPWA project officer Alice Butler said PA tools, incorporated into normal farming operations, offered a simple and effective means of implementing and measuring on-farm trials to test the yield or economic effect of a treatment.

Ms Butler said the booklet included case studies of how growers in different parts of WA’s grainbelt had measured the economic returns of treatments to help them make whole-farm decisions.

“Using yield data from the harvester’s monitor to analyse these trials puts a value to the practice change and allows growers to understand how profitable the change is to their businesses,” Ms Butler said.

 “The purpose of the publication is to provide examples of the methodologies used and to assist other growers to competently conduct their own on-farm trials to calculate the potential return on an investment.”

Ms Butler said farming businesses had different approaches for testing high cost treatments such as claying.

“You may be fixing something for the future and this increases the importance of doing trials so that you understand the long-term financial impact an input will have on your business’s profitability,” she said. 

Ms Butler said growers featured in the publication included: Ben Cripps, of Binnu, on variable rate phosphorus; Brendon and Kelly O’Neill, of Ongerup, on reassessing the use of gypsum on grey clays; Ian and Lyndon Mickel, of Beaumont and Condingup, on delving to suppress non-wetting issues; and Mic and Marnie Fels, of Wittenoom Hills, on creating a duplex soil type using a mouldboard plough and claying.

Other information included in the booklet includes a simple calculator to help growers determine return on investment; trial design; site selection; the use of global positioning systems (GPS); marking out and harvesting trials; and analysing results using yield data.

Calculating return on investment for on farm trials is available from the GEDC website.

www.grdc.com.au

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Australia’s commercial log plantations yield less

THE Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) is forecasting a decrease in the  future log availability from Australia’s commercial plantations.

In its report, Australia’s plantation log supply 2015–2059, released recently by the acting executive director of ABARES, Peter Gooday, the volume of plantation logs harvested from Australia’s plantation estate has been shown to consistently grown over the past decade. It now accounts for 85 percent of all logs harvested in Australia. 

“The total potential log availability from Australia’s commercial plantation estate is forecast to increase to an annual average of 29.7 million cubic metres in the 2015 to 2019 period,” Mr Gooday said.

“This increase will be followed by a decline to an annual average of 27.0 million cubic metres per year for the 2020 to 2024 period.”

The report found that the availability of softwood sawlogs was forecast to remain steady at around 11.9 million cubic metres per year for the next 15 to 20 years, followed by an increase up to around 13 million cubic metres per year from 2030 to 2045.

Compared with the 2012 log supply report, Mr Gooday said the average forecast of total plantation log availability is 10 percent lower in this report, with the average forecast of hardwood log availability 21 percent lower and softwood log availability 2 percent lower.

“The majority of the decline in total log availability is because the expected yield from hardwood plantations is forecast to decline, as plantations of low commerciality are not replanted and some lease agreements with landholders are not renewed,” Mr Gooday said.

“It is estimated that the total commercial plantation estate may decrease by around 80,000 to 100,000 hectares over the next 10 to 15 years.”

The report, Australia’s plantation log supply 2015 – 2059, is available at ABARES Publications.

www.agriculture.gov.au

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Piñata Farms develops ‘substrate’ strawberries to fill seasonal gaps

QUEENSLAND strawberry producer, Piñata Farms, has been picking its first substrate-grown strawberries at Wamuran on the Sunshine Coast, after venturing into substrate production over winter.

Managing director Gavin Scurr said the quality of fruit produced using the substrate method had so far exceeded expectations. 

“The eating quality is superb and the berries have a vibrant colour with a natural sheen,” Mr Scurr said.

“Because they’re growing under polytunnels, they’ve stayed warm throughout winter and that’s resulted in brighter, cleaner fruit.”

Piñata Farms grows winter strawberries at Wamuran and summer strawberries at Stanthorpe, southern Queensland, for year round availability. Fruit is produced both in the open field and under polytunnels. Substrate strawberries grow in coconut coir on tiered shelves.

Mr Scurr said the Albion variety, which Piñata Farms had produced for some time, was the chief variety being grown in substrate. US-developed varieties, Portola and San Andreas were being trialled.

“As the substrate harvest progresses, all indications are for a positive outcome,” Mr Scurr said. “We’re hoping to keep producing substrate fruit at Wamuran for several months yet.

“By then, harvesting will have begun at Stanthorpe, leading to peak production in November. There should be a plentiful supply of Piñata strawberries right through until Christmas.”

Mr Scurr said he expected the field-grown harvest at Wamuran to end by early October, depending on the weather. 

“Once the temperature reaches 30 degrees, it starts to get challenging as it’s too hot for the fruit.”

Mr Scurr said it had been a tough season for Queensland strawberry producers with yield down about 20 percent on a per plant basis across the industry.

“That's due to an unseasonally warm autumn which delayed planting for many growers and resulted in plants being less robust than usual,” he said.

However, early substrate results at Wamuran had buoyed hopes for a good start to summer production, he said.
“Wamuran's climate means we can produce field-grown and substrate strawberries progressively from now on, with the aim being to extend the season as late as possible to fill a supply window in October and November.

“At Stanthorpe, both field and polytunnel crops produce at the same time, so we’ll aim to produce fruit earlier there, so there’s no drop in the total yield between the farms.”

Piñata Farms has selected three new European-bred varieties for commercial trials following Mr Scurr’s recent visit to some of Europe’s best strawberry breeders. Depending on the outcome of trials, they will be commercially produced in 2020.

“We’ve selected two winter varieties to grow at Wamuran,” Mr Scurr said. “Both have a better yield while maintaining flavour. The variety we’ve selected for summer production has been specifically chosen to fill a supply window in the April-May period.”

Mr Scurr said varietal selection was key in Piñata Farms’ quest to produce strawberries outside the traditional Queensland strawberry season.
“The industry would produce three times as much fruit in September than in October. We’re trying to plug gaps at both ends of the supply period by looking at varieties and matching them to growing methods and growing regions.”

Piñata strawberries are available at leading supermarkets in Queensland, New South Wales and Victoria.

www.pinata.com.au

 

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