Australian Agricultural Company, the other landholder taken by foreign investors
by Matthew Cranston
While Australia has been held captive by the potential foreign ownership of Australia's largest landholder, S.Kidman & Co, quietly in the background a shrewd billionaire from London has taken a grip on the country's second largest landholder – the Australian Agricultural Company (AACo).
Joe Lewis, the owner of football team Tottenham Hotspur, is the ultimate owner of the AA Trust, which has just converted 59 of 160 Convertible Notes into fully paid ordinary shares in AACo.
AACo owns 7 million hectares of land in Queensland and the Northern Territory, equating to about 1 per cent of Australia's land mass.
It's a big show of confidence in the company from Lewis, whose total wealth is estimated by Forbes at $US5.3 billion ($7 billion).
He could have taken the cash, but instead he has taken shares and built his stake further in the company to just under 38 per cent.
That 38 per cent is worth about $350 million, which is not far off the original $365 million bid by Gina Rinehart's Hancock Prospecting and her Chinese co-investor, Shanghai CRED, for S.Kidman & Co.
AACo also has a much higher quality portfolio of cattle stations than S.Kidman & Co.
Furthermore, the value of AACo's properties jumped 15.8 per cent this year, while Kidman's showed no movement in value in the fiscal 2016 period.
Mr Lewis, who is chairman of private equity group Tavistock, which he founded in 1975, is one of several billionaires to have shown a new interest in Australian agriculture.
Mining magnates Gina Rinehart and Andrew Forest, along with retailing billionaires Brett Blundy and Gerry Harvey, have made significant agricultural investments in the past 12 to 18 months.
But of all the billionaires, Mr Lewis has been the most low-key.
His investment in AACo started as far back as 2011 and now has two Tavistock directors on the AACo board.
But the real genius deal was done in 2013, when AACo was trying to raise capital to reduce its gearing from more than 40 per cent to less than 25 per cent as well as find funding for its new "vertically integrated strategy", which included an abattoir in Darwin.
As part of the deal, he was issued 160 convertible notes, which were given a fixed share conversion price of $1.148. That price was a significant discount to AACo's net tangible assets per security of $1.90.
Furthermore, there was a separate $219 million non-renounceable entitlement offer priced at $1 per share.
Mr Lewis, as an existing shareholder at the time, took up his full entitlement worth about $29.6 million and then also sub underwrote the offer – that is he would buy any of the new shares that existing shareholders did not take up.
In the past three years cattle prices have risen to all-time highs and rural property values have bounced back, giving AACo's share price a kick up to $1.74.
As such, Mr Lewis has found that not only has he increased his stake in the company but also made a handsome profit along the way – and all with very little public outcry.