Agribusiness company multiples on the rise

Food & Agribusiness Report with InterFinancial >>

PRICES are rising for food manufacturing and agribusiness companies in Australia, according to reports from M&A (mergers and acquisitions) specialists at InterFinancial.

InterFinancial’s research found multiples in the food and agribusiness sector increased up until the end of April, in contrast to a weaker overall market. At the end of April, the food and agribusiness sector traded on a forward price-to-earnings (PE) ratio of 17.3 times (17.3x), in line with the ASX200 on 17.0x, InterFinancial chairman Paul Keehan said, noting quite a lot of movement in the industry.

Leppington Pastoral Company, the Australian dairy group owned by the Perich family, has partnered with Moxey Farms to form a consortium named Australian Fresh Milk Holdings, with the objective of transforming Moxey into a major dairy farming business. China’s New Hope Dairy and Freedom Foods are also members in the consortium which is expected to invest more than $80 million. 

Ridley Corporation has signed a contract to sell a former feedmill site for $3m. The buyer will pay 10 percent (10%) of consideration by way of deposit and the balance upon completion.

Australian Dairy Farms Group has acquired three producing dairy farms in Victoria for approximately $16m. This acquisition is the first step for Australian Dairy Farms’ plans to raise $41m to fund the acquisition of six Australian dairy farms in Victoria for a total value of $39m.

There is a fair degree of early stage M&A activity and innovative growth moves throughout the sector, according to InterFinancial sources.

Blue Sky Alternative Investments is targeting the $1.9 trillion Australian superannuation industry with a new fund that will offer exposure to three agricultural asset classes: mid-tier agri-infrastructure, agribusiness private equity and water entitlements. Australia’s local pension industry has traditionally stayed away from agriculture investments but the company is confident the fund will attract commitments from other local funds.

Westchester Group, Laguna Bay Pastoral Company and Teachers Insurance and Annuity Association of America are believed to be among the potential suitors for Select Harvests’ almond orchards which are up for sale. The offshore agriculture investors are believed to be in the running, along with some local funds who are familiar with the sale-and-leaseback structure.

GrainCorp will invest $60m on 13 country site upgrades in 2015 as a part of the $200m to be spent over three years under Project Regeneration. Project Regeneration involves developing a network of over 50 high capacity country sites to support an efficient rail operation which will reduce rail costs by around $5 per tonne and return up to 1 million tonnes of grain to rail.

Tassal Group is believed to be advancing negotiations to acquire De Costi Seafoods.

Gunns’ receivers and managers are seeking expressions of interest to acquire 550 hectares of land suitable for industrial development and other uses located in Bell Bay, Northern Tasmania.

Private equity players including Pacific Equity Partners have essentially been ruled out as buyers for Costa Group, the Australian fruit and vegetable business due to the sellers’ price expectations. Costa’s owners, Paine & Partners and the Costa family, are believed to be seeking 10x to 12x earnings for the business. Limited interest from potential buyers could prompt Costa Group to pursue a $1bn IPO.

MPDT Tree Service, a private family-owned Australian tree lopping and vegetation management company, will consider a sale that could facilitate the next phase of the company growth, said Billy Quaid. The owners are also planning to focus on alternative businesses in the future, in particular in the agricultural space.

The Chia Co, a private equity-backed Australian grower and distributor of Chia seed products, is looking to enter China and is seeking approaches to establish joint ventures locally, managing director John Foss said.

Macquarie’s Pastoral Fund, one of Australia’s largest landowners, could bid for S. Kidman & Co, the Australian landowner. A private fundraising by the Pastoral Fund has led to expectations that it could bid for S. Kidman.

Byron Bay Chilli Company, a privately held Australian producer of jalapeño-based condiments and snacks, is actively seeking a partnership in North America while identifying other global expansion opportunities, co-owner Murray Richardson said. A strategic investor would be considered if it owned a manufacturing plant that would offer the benefit of lowered cost of production.

Greenland Group, a Chinese state-owned property developer, is in talks to acquire food manufacturers in Australia and New Zealand which it could then inject into its newly-launched supermarket business, known as G-Super.

Odin Energy has executed a MoU to acquire The Hemp Corporation, via a SPV. The Hemp Corporation controls the supply and procurement process of hemp from seed propagation, planting, harvesting, processing and distribution.

Avon Valley Beef, a family-owned and operated beef wholesale and retail business, is looking for a buyer and could sell the business in 2015, founder Peter Hepple said. The owner prefers to sell the business to local buyers as he is determined to keep it Australia-owned.

Consolidated Pastoral, the Australian beef producer, is said to have sent sale documents to potential buyers in a stake sale process. Owners Terra Firma is believed to be seeking a partner to provide an investment of $300m-$500m.

Archer Capital’s exit from Brownes Dairy is likely to be delayed as the Western Australia-based company’s new management builds a track record.

Vita Coco, a privately-held New York-based coconut water company, is opportunistic about acquisitions, chief executive and co-founder Michael Kirban said recently.

The M&A specialists in food and agribusiness at InterFinancial, chairman Paul Keehan, directors David Hassum and  Brett Plant and associate director Mark Steinhardt compile market intelligence from their own private sources along with the Australian Securities Exchange (ASX), mergermarket.com and various other public information sources. Forecasts are consensus forecasts sourced from S&P Capital IQ.

www.interfinancial.com.au

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