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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ONE of the world’s great innovations for rural properties, the Lightning Fence Dropper, is still going strong after it was developed in Australia more than 50 years ago. In fact, the company that makes it is experiencing higher demand than ever.

The Lightning Fence Dropper remains a mainstay Australia-wide for rural wire and post fencing, selling more than a million examples a year – its patented design and quality local manufacture has never been bettered – and now the device looks like being picked up internationally. 

Basically, the Fence Dropper changes the nature of rural post-and-wire fencing, reinforcing it and introducing an ‘elasticity’ so it can withstand impacts from cattle, sheep and horses – even kangaroos. The units clip among the wires to keep them properly spaced, to provide a visible signal that a fence exists, and allowing a greater separation of posts, to save costs.

From the earliest days of wire fencing, both in Australia and in the US where it was also common on large farming properties, the earliest droppers succeeded because of low cost and speed of roll-out – but also regularly failed under impact from animals. Barbed wire fencing may have reduced that problem, but created damage problems of its own – as it proved far more expensive and troublesome to install.

The idea of a vertical wire ‘stay’ that would reinforce the fencing has been around for more than 150 years and was applied with some success. The fundamentals were well understood and almost 150 different fence dropper designs were patented in Australia from the 1890s to about 1914. Yet fewer than 50 were ever manufactured and sold in large numbers.

It was not until the Lightning Fence Dropper was developed in Australia the 1960s, made of newly developed galvanised high-tensile steel and in an efficient shape like that of a stylized lightning bolt, easy to lever on with a purpose-made tool, that the system really made its mark.

With the development of the Lightning Fence Dropper and its patent granted on October 9, 1968 – to its developer, the late Roger Sachs of Mayne Industries in Brisbane – manufacturing triggered up and the device had a huge impact on farm fencing around the country. The name has become generic, with farmers often referring to the devices simply as ‘lightning droppers’. 

The design was originally manufactured and sold by Mr Sachs’ company National Nails Pty Ltd in the 1960s, which later became Hi Tensile. The new device had major advantages over previous fence droppers, which were awkward to manufacture and time consuming to install.

“If you weren’t careful you would staple your fingers or poke your eyes out when manufacturing or installing those earlier ones,” said Nick Sachs, son of inventor Roger, who took over the running of National Nails/Lightning Fence droppers after the untimely passing of his father in 1992. “Dad’s invention changed all that and made it quick, easy and safe.”

By 1998, with the help of a Brisbane Marketing Company, the Lightning Fence Droppers part of the business expanded its distribution network and increased sales to more than 1,000,000 droppers each year throughout Australia.

Like all great manufacturers, the business has undergone a continuous improvement process and today, where five giant machines once churned out the droppers in their millions, two custom-developed machines do the job with more precision and in greater numbers than ever before.

As the science of agricultural fencing has developed, so has the use of the fence droppers.

A good example is a bull striking a fence with post spacings of 4m. With approximately 450kg of force, it can impose a load of over 200kg of lateral force on the posts.

If that same bull hits a fence with its posts spaced 30m apart, the impact felt at the post will be around 80kg. Roughly 80 percent less. 

A wire subjected to a tension less than its yield point will return to its original length when tension is removed. However, if the tension exceeds the yield point, the wire will stretch permanently.

Driving staples tightly against the wire on line posts interferes with the wire’s elasticity and reduces the wire’s tolerance to impacts.

“The steel we use to make our Lightning Fence Droppers is basically the same used in piano wire,” Mr Sachs said.

“It is a high tensile galvanised spring steel, with incredible yield strength.  This allows the wire to return to its original shape after significant bending or twisting. No bull!”

Mr Sachs said Lightning Fence Droppers were still the only fence dropper that could be bent end to end and have it return to its original yield and strength.

“It remains the only fence dropper guaranteed for the life of the fence, too,” he said.

The design and quality of material is still unmatched in field performance by imported imitators, many of which have attempted to wrest the market from the Australian company in recent years.

“Our best advocates are our long-term customers,” Mr Sachs said. “Some of our existing clients are farmers that tell us they have had our fence droppers working for them for over 40 years.

“Some of our best new customers are those that have taken the advice of these old timers, after wasting money on some cheaper alternatives that have failed in the field and caused thousands of dollars of recovery damage.”

South Australian farmer Rob Cooper, of Waitipinga, said he had placed his faith in Lightning Fence Droppers after extensive research.

“Lightning Fence Droppers have saved me thousands of dollars,” Mr Cooper said. “My existing eight-strand plain wire fences were not Dorper-proof … Dorpers (a hardy and robust breed of sheep) are renowned for being hard on fences.

“They would hardly break stride to get through the plain wire fences previously. These droppers have 100 percent sheep proofed my existing fences at a fraction of the price of ring lock. They are very quick to install, too. Very impressed. Beautifully designed product.”

Apart from the Lightning Fence Dropper’s great reputation in reliable stock management, it has also proven its worth in handling natural disasters such as floods – and it was put to the extreme test in 2011 in Queensland.

“A lot of fencing got wiped out from raging flood waters – even those with fence droppers – but after it was all over, the farmers told us that they had to repair fewer fences that had our Lightning Fence Droppers deployed,” Mr Sachs said. “That was an unexpected, but very heartening result.”

He put the advantages of the Lightning Fence Dropper down to the quality of the steel and the way it was manufactured, allowing much greater elasticity and strength than other systems offered. The company also makes compatible steel and composite posts that are even stronger than the usual wooden or star-picket units and much quicker to deploy as smaller holes can be dug, offering greater spans.

“At the end of the day, when you are managing these vast properties, you want to do the fencing once, as quickly and cost-effectively as possible, and know you can rely on it to keep your stock in check with little chance of injury to your stock,” Mr Sachs said. “You also want to be able to trust that it will do its job long into the future with little maintenance.

“That’s been the great advantage of the Lightning Fence Dropper over the past 50-or-so years, it’s stood the test of time and it is still out-performing the knock-offs and other units that claim to do the same thing.

“What we have to do is keep showing and reminding our rural property owners that this is the Australian invention that not only set the benchmark 50 years ago, it has outlasted and out-performed all other solutions ever since. It is as transformative and cost-effective over the long term today as it has ever been.”

www.fencedropper.com.au

http://www.austehc.unimelb.edu.au/tia/844.html

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RESEARCH priorities identified by Grains Research and Development Corporation (GRDC) levy payers in the northern region have drawn $14 million in new investment into the region’s research and development (R&D) capability.

Federal Minister for Agriculture, Barnaby Joyce, and the Queensland Minister for Agriculture, Fisheries and Forestry, John McVeigh, confirmed in Toowoomba recently that grain growers across Queensland would benefit from three significant new projects, resulting in the employment of 17 new grain researchers and technical officers. 

The investments were identified in the northern grains industry strategic plan, actively driven by the GRDC over the past 12 months and developed collaboratively by growers, researchers and government.

The projects will run over five years, with almost $10 million invested by the GRDC and the remainder from CSIRO, the Queensland Department of Agriculture, Fisheries and Forestry and the NSW Department of Primary Industries.

Chair of the GRDC’s Northern Region Panel, James Clark, said the investments would be critical to succession planning in key areas of the northern region, will significantly boost research capacity and will provide growers with localised farming systems solutions.

“The largest of the three projects will see the GRDC contributing $4.96 million to fund the appointment of 11 additional grain researchers in Queensland to address both succession and capacity issues that challenge the productivity, profitability and sustainability of the northern grains farming systems,” Mr Clark said.

“These new positions will focus on areas including crop and cereal pathology and agronomy, farming systems, weed sciences and pulse entomology.

“This is an extremely exciting project and is the result of extensive analysis we’ve undertaken to ensure we have sufficient R&D capacity across the entire Queensland grains industry to meet short and long term challenges,” Mr Clark said.

“A further $5 million is being invested by the GRDC into two northern farming systems projects that will conduct trials across the entire northern region in response to growers’ calls to identify farming systems solutions to production issues rather than answers from ‘the can or the bag’,” he said.

The two farming systems projects are linked and will comprise a central CSIRO-run trial on the Darling Downs representing a range of possible crop rotations and cropping intensities.

This central trial will be complemented by a number of additional regional trial sites in Emerald, Goondiwindi or Billa Billa, Narrabri, Trangie and the Liverpool Plains. The Queensland regional trials will also see the appointment of technical officers in Toowoomba, Emerald and Goondiwindi.

GRDC chair, Richard Clark, said all three investments were a direct response to areas that were identified as key priorities by GRDC’s northern region levy payers.

“The urgent need for on-going significant investment in research and development is a message that has long been promoted by the GRDC and has now won traction with state governments, resulting in this exciting collaboration,” Richard Clark said.

“This partnership with government and CSIRO is helping to future proof the northern grains industry and will ensure Queensland growers have access to the most relevant tools, information and advice for profitable cropping system performance into the future.”

www.grdc.com.au

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QUEENSLAND farmers now have until June 30 to apply for a loan under the Australian Government’s Farm Finance Concessional Loans Scheme.

Federal Minister for Agriculture, Barnaby Joyce, and Queensland Minister for Agriculture and Fisheries, Bill Byrne, agreed to extend the application closing date to allow Queensland farm businesses more time to take advantage of the loans scheme. 

“These loans assist farm business in the short term with debt restructuring, productivity enhancements, or a combination of the two, and help build productivity and profitability in the longer term,” Mr Joyce said.

“The Australian Government has made a total of $50 million in loans available to eligible farm businesses in Queensland for the 2014–15 round of the loans scheme. Funding is still available.”

Mr Byrne said loans of up to $1 million were available to eligible farm businesses, with an interest rate currently set at 4.34 percent and a loan term of five years.

“Although the closing date for applications has been extended to June 30, if you are interested in taking advantage of these loans, I encourage you not to delay in finding out more and submitting an application,” Mr Byrne said.

In addition to the $420 million Farm Finance Concessional Loans Scheme, Mr Joyce said the Federal Government has a range of assistance measures available to farmers and rural communities experiencing hardship—including income support through the Farm Household Allowance and free financial counselling through the Rural Financial Counselling Service.

“More than $113 million has been delivered to 205 farmers under the three concessional loans schemes available to Queensland primary producers," Mr Joyce said.

“I encourage farmers not to self assess their eligibility for any of these measures, but to talk to the experts and find out more about their options."

The Drought Concessional Loans Scheme and Drought Recovery Concessional Loans Scheme are also operating in Queensland, and are delivered by QRAA.

More information on the three loans schemes, including eligibility criteria and application details, can be found at qraa.qld.gov.au.

Loan applications for the Farm Finance, Drought, and Drought Recovery concessional loans schemes close at 5pm on June 30, or when funds are fully committed, Mr Joyce said, whichever is sooner.

For more information on the range of Australian Government assistance available to farmers, farm businesses and rural communities, visit agriculture.gov.au/assistance.

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