Asian investors want $1bn farm deals but sector not ready

The Australian | 26 March 2014

Asian investors want $1bn farm deals but sector not ready


INTERNATIONAL companies, pension funds and sovereign wealth funds are ready and willing to invest in the Australian farm sector, but many parts of the industry are still not investment-ready and lack the depth in management to facilitate deals.

The Australian’s Global Food Forum, supported by Visy, was also told that while a number of foreigners — including real estate investment trusts (REITS) from Singapore — were keen to invest, many were seeking investments of significant scale, usually a minimum of $500 million, which were scarce in Australia.

“China Investment Corporation (China’s giant sovereign wealth fund) would like to do deal sizes of minimum $500 million,” said CBRE Asia regional director Danny Thomas.

He added that because Chinese companies often only wanted to take a 50 per cent interest in deals, the transaction had to be worth at least $1 billion.

“There are not many of those,” he pointed out.

Kidder Williams managing director David Williams said that pension funds from the likes of Denmark, Sweden and Russia as well as sovereign wealth funds and multinational companies were ready to invest in Australia.

His comments were backed by Mr Thomas, who said most activity was coming post-farm gate in abattoirs and wineries and that he was starting to see more inquiries from Japan and Korea, two of Australia’s traditional trading partners.

“There are a lot more sources of capital around now,’’ he added. “We are seeing more nimble capital, some looking for equity partnerships, they act more like private equity, some of those want offtake. We are seeing some corporates looking for investors to buy agricultural assets for them.”

But Mr Williams said the investors had several concerns about investing here, notably the lack of depth in farm management which he described as a “gaping wound’’.

‘’Investors are pointing out the lack of management in some key sectors of the economy,’’ he said.

Mr Thomas said he was seeing deals fall over because farmers were “not ready”.

‘’The challenge for farmers is to get themselves investment ready. They need to make sure they appoint good advisers and understand what the capital is looking for — get themselves ready to receive the inbound capital. There is oddles of it at the moment,’’ he said.

Macquarie Agricultural Funds Management co-head Tim Hornibrook said xenophobia about foreign investment also remained an obstacle, despite Australian product still managing to be priced on a global basis.

“We started trying to raise capital out of Australia but gave up. We need to get over the xenophobia about bringing in offshore capital,’’ he said.

His comments were backed by Simplot Australia managing director Terry O’Brien, who said the government’s decision to block the $3 billion Archer Daniels Midland bid for Graincorp “certainly got mentioned in the US”.

“Our company just wants to be welcomed here and be loved. But if they don’t feel the country is welcoming they start to look elsewhere,’’ he said, noting Simplot Australia was competing for capital from its US parent with big growth countries like China and Sth America.

“They are saying until we see more a bit more stability and a bit more welcoming attitude from the regulators etc in Australia, then it makes them hard to put that money up.’’

“The scale thing is a real issue as well. We really do suffer from a lack of scale in Australia. It is really important for us to sell in both the domestic market and the export market.’’
Original source: The Australian

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