Northern Queensladn Register | 8 July 2013
Next boom cattle: De Lacy
by AMANTHONY MACDONALD AND JOYCE MOULLAKIS
FORMER Macarthur Coal chairman Keith De Lacy is backing the potential $100 million float of a beef cattle company, arguing the mining boom is over and the agricultural sector will experience the next big surge of investment.
The former Queensland Treasurer told The Australian Financial Review he was finished with the resources sector and would focus on companies that could profit from providing food to Asia's growing middle class.
"My view is the next big boom will be the soft commodities boom dependent upon feeding a hungry world," he said.
"Increasing incomes, particularly in Asia, mean these people would be looking more for carbohydrates, proteins and middle class foods."
The comments come as Mr De Lacy builds a northern Australian cattle property portfolio with a view to list it on the Australian Securities Exchange by the end of this year.
Mr De Lacy presided over Macarthur Coal from its listing in 2001 until its $5 billion takeover at the top of the coal market in 2011. However, coal prices have sunk over the past 18 months and big miners including BHP Billiton, Rio Tinto, Peabody Energy and Vale are now hoping to sell billions of dollars worth of Australian coal assets.
Mr De Lacy and his partners' new company, The Staples and Agricultural Global Beef Investment, also known as STAG Beef, will have to overcome negative sentiment from equity investors towards the Australian agriculture sector.
Advertising veteran and rural property owner Harold Mitchell has even called the bottom of the cattle station market, citing relief from the falling Australian dollar as invigorating export markets.
"This is the best time ever to get positioned," Mr Mitchell said. "We can see a turnaround, there is no doubt about it."
A successful float would buck a recent trend for listed agricultural companies. PrimeAg, Australian Agricultural Company and Ridley Corporation have historically traded below book value on concerns over their commodity price risk and seasonal factors. These companies have all turned to selling assets in recent months as shareholders demand better returns.
The shining light has been grains handler and grower GrainCorp, which has attracted a $3 billion takeover offer from global player Archer Daniels Midland currently before the Foreign Investment Review Board.
For farmers, debt funding has also dried up as banks take losses on the value of rural property and livestock, making it hard to attract capital.
Mr De Lacy said agriculture companies had to change their ways to win back the sharemarket's trust.
"We have to do things differently than what we have done in the past," he said. "We have got to be bigger, we have to carry out our own research and development, we have to have the market power. That's the way of the future."
STAG Beef has been seeking to buy properties off distressed sellers in recent months, with the transactions due to close should it raise equity and obtain an ASX listing. Mr De Lacy warned it was "early days" but broker BBY is believed to be working on the deal and sources said STAG may seek to raise about $100 million.
STAG Beef's entry into the cattle property market comes as the beef industry across northern Australian has been struggling with cattle process down, a poor wet season in Queensland and last year's ban on live exports, which caused enormous problems.
The industry's woes have created a buying opportunity for the likes of Mr De Lacy.
Mr De Lacy said STAG Beef would also differentiate itself from other listed cattle operations by focusing on breeding and rearing cattle only until they were weaned, rather than preparing them for export.
"Most of the other companies focus on the whole cycle," he said. "The capital intensive end of the cycle – the feedlotting, beef processing and so forth – is where they tend to get into trouble."
Mr De Lacy expected offshore investors to back STAG Beef's theme and support the company's initial public offer. Large offshore investors – such as ADM and fund manager TIAA-CREF – have been among the buyers recently.
"There are many offshore agricultural investors very keen to invest in Australia," he said. "But we are also hoping Australians will be interested and also attracted by the very strong returns."
- with Matthew Cranston
Next boom cattle: De Lacy
by AMANTHONY MACDONALD AND JOYCE MOULLAKIS
FORMER Macarthur Coal chairman Keith De Lacy is backing the potential $100 million float of a beef cattle company, arguing the mining boom is over and the agricultural sector will experience the next big surge of investment.
The former Queensland Treasurer told The Australian Financial Review he was finished with the resources sector and would focus on companies that could profit from providing food to Asia's growing middle class.
"My view is the next big boom will be the soft commodities boom dependent upon feeding a hungry world," he said.
"Increasing incomes, particularly in Asia, mean these people would be looking more for carbohydrates, proteins and middle class foods."
The comments come as Mr De Lacy builds a northern Australian cattle property portfolio with a view to list it on the Australian Securities Exchange by the end of this year.
Mr De Lacy presided over Macarthur Coal from its listing in 2001 until its $5 billion takeover at the top of the coal market in 2011. However, coal prices have sunk over the past 18 months and big miners including BHP Billiton, Rio Tinto, Peabody Energy and Vale are now hoping to sell billions of dollars worth of Australian coal assets.
Mr De Lacy and his partners' new company, The Staples and Agricultural Global Beef Investment, also known as STAG Beef, will have to overcome negative sentiment from equity investors towards the Australian agriculture sector.
Advertising veteran and rural property owner Harold Mitchell has even called the bottom of the cattle station market, citing relief from the falling Australian dollar as invigorating export markets.
"This is the best time ever to get positioned," Mr Mitchell said. "We can see a turnaround, there is no doubt about it."
A successful float would buck a recent trend for listed agricultural companies. PrimeAg, Australian Agricultural Company and Ridley Corporation have historically traded below book value on concerns over their commodity price risk and seasonal factors. These companies have all turned to selling assets in recent months as shareholders demand better returns.
The shining light has been grains handler and grower GrainCorp, which has attracted a $3 billion takeover offer from global player Archer Daniels Midland currently before the Foreign Investment Review Board.
For farmers, debt funding has also dried up as banks take losses on the value of rural property and livestock, making it hard to attract capital.
Mr De Lacy said agriculture companies had to change their ways to win back the sharemarket's trust.
"We have to do things differently than what we have done in the past," he said. "We have got to be bigger, we have to carry out our own research and development, we have to have the market power. That's the way of the future."
STAG Beef has been seeking to buy properties off distressed sellers in recent months, with the transactions due to close should it raise equity and obtain an ASX listing. Mr De Lacy warned it was "early days" but broker BBY is believed to be working on the deal and sources said STAG may seek to raise about $100 million.
STAG Beef's entry into the cattle property market comes as the beef industry across northern Australian has been struggling with cattle process down, a poor wet season in Queensland and last year's ban on live exports, which caused enormous problems.
The industry's woes have created a buying opportunity for the likes of Mr De Lacy.
Mr De Lacy said STAG Beef would also differentiate itself from other listed cattle operations by focusing on breeding and rearing cattle only until they were weaned, rather than preparing them for export.
"Most of the other companies focus on the whole cycle," he said. "The capital intensive end of the cycle – the feedlotting, beef processing and so forth – is where they tend to get into trouble."
Mr De Lacy expected offshore investors to back STAG Beef's theme and support the company's initial public offer. Large offshore investors – such as ADM and fund manager TIAA-CREF – have been among the buyers recently.
"There are many offshore agricultural investors very keen to invest in Australia," he said. "But we are also hoping Australians will be interested and also attracted by the very strong returns."
- with Matthew Cranston
