QIC to buy Australia cattle station business for $295m

QIC, which is controlled by the Queensland government, is advising an unspecified number of superannuation funds and the UK-based Pension Protection Fund, which between them will hold the bulk of the majority stake being acquired. The 80% interest comprises 46% from the Foster family and 34% from UK-listed real assets investor M.P. Evans Group.

Other minority shareholders will be offered the chance to exit their holdings as part of the transaction or remain investors in NAP, while the Foster family will retain a 20% interest in the group.

NAP is a vertically integrated beef business with 178,000 head of cattle based on 5.8 million hectares of land across Queensland and the Northern Territory. It has 13 cattle stations and one feedlot. Cattle are grass fed and grain finished for sale to Australian meat processors who distribute beef products domestically and internationally.

"Australia enjoys an enviable reputation for producing clean, healthy food. QIC has a track record of making long-term investments in companies and their people. Our vision for NAP is to see it prosper by capitalizing on strong beef demand driven by growth in Asia, which is expected to account for 47% of global beef demand by 2024," said Marcus Simpson, head of global private equity at QIC, who led the team working on the NAP deal, in a statement.

Australian beef exports to China reached 148,222 tons in 2015, up from just 32,906 tons in 2012, according to Meat & Livestock Australia. The country is now the fourth-largest buyer of Australian beef after the US, Japan and South Korea. Asian markets - Indonesia, Taiwan, the Philippines and Hong Kong - also occupy four of the next six places in the rankings.

This has prompted significant strategic interest. Notably, earlier this year a Chinese consortium led by Shanghai Pengxin Group - which included Australian Rural Capital - agreed to buy S. Kidman & Co. for A$379 million. The deal was recently withdrawn when the Australian government indicated it would block the deal on national interest grounds.

Several smaller cattle deals have gone through in recent years involving China-related buyers such as Dashang Group, Xinfa Ma and Fucheng Group, which bought a property from M.P. Evans for A$28 million. Meanwhile, Hosen Capital - which counts New Hope Group among its backers - and pork processor WH Group both bought abattoir businesses in Australia, and the A$280 million sale of dairy farm operator Van Diemen's Land Company to Chinese-owned Moon Lake Investments was finalized last month.

QIC's investment in NAP is likely to involve forging supply chain agreements - perhaps going as far as formal off-take arrangements - with Chinese companies. Damien Frawley, CEO of QIC, said the deal "captures the benefits of our networks of institutional investors and connections to Asian corporate relationships."

It is also likely the most significant Australian institutional activity in the domestic cattle industry since AMP's life insurance unit was involved in Stanbroke Pastoral Company. The investor exited in 2003 after a 39-year holding period, selling the business for A$490 million, including debt - said to be an undervaluation, although the net return was still 24%.

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• Topics
• Australasia
• Buyouts
• Consumer
• Australia
• Agriculture
• QIC