The Australian Agricultural Company (AACo), a wholly owned subsidiary of Futuris Corporation Limited (ASX Code: FCL), Friday (6 July) launched an Initial Public Offering (IPO) seeking to raise $111 million. In addition, there is an over-allotment option, which, if exercised in full, would increase the Offer to $120 million.
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At the Retail Price, AACo will have a market capitalisation of $185 million, or $189 million if the over-allotment option is exercised in full. The Offer is expected to open on 13 July 2001 and close on Thursday, 2 August, 2001.
Retail investors will be able to apply for AACo shares at a price of $1.00 per share (the Retail Price) while the Indicative Price Range for the institutional bookbuild has been set at $1.00 to $1.10 per share. Futuris shareholders and noteholders will have priority in the allocation at the Retail Price.
Incorporated in 1824, AACo is one of Australia’s oldest companies, running more than 380,000 head of prime beef cattle on 18 stations, covering approximately 65,000 square kilometres in Queensland and the Northern Territory. AACo Directors have forecast a Net Profit of $21.1 million for the 12 months to June 30, 2002.
Chief Executive of AACo Mr Peter Holmes a Court said, “I am confident the IPO will capture the imagination of the public, who are offered the opportunity to invest in a major cattle producer with a significant position in the Australian food industry.”
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By GlobalDataFuturis will offer for sale approximately 101 million shares, with a further 10 million new shares offered for subscription by AACo. After completion of the offer, Futuris will retain approximately 40 per cent of the issued capital of AACo (or approximately 37 per cent if the over-allotment option is exercised in full).
Mr Les Wozniczka, Director-Corporate of Futuris, said “AACo’s growth opportunities have convinced Futuris that the appropriate business strategy is to give AACo the freedom to access the capital markets directly. As an independent public company, AACo will be able to achieve its business objectives without the competing demands of other Futuris business units. Futuris will continue to support AACo as a major shareholder including support for future capital raisings and acquisitions.”
He added “Futuris has accepted advice that AACo be offered under the IPO at a price earnings multiple below 10 times 2002 earnings and a dividend yield of 6 per cent fully franked. Although Futuris is trading on a historical price earnings multiple of 20 times, which is double that proposed for AACo, and a dividend yield of 3.1 per cent that is half the yield to be offered by AACo, we have protected the interests of Futuris shareholders and noteholders by ensuring they receive a priority allocation of AACo shares.”
Mr Holmes à Court said “we have achieved considerable success from our focus on our cattle breeding program and plan to extend the Company’s involvement in higher margin areas of the production chain through the creation of retail and ingredient brands. As one of the largest companies in the Australian cattle industry, AACo benefits from several natural advantages – access to quality pasture, a significant wet season rainfall on its northern properties and relative insulation from many of the exotic diseases that have created havoc in Europe”.
AACo plans to expand through herd growth and capturing a greater share of the production chain. The company believes it is well positioned to play a major role in any future restructuring and consolidation of the Australian cattle industry.
Mr Holmes à Court said “There is currently a revolution in the consumption of beef, with supermarkets in the US converting to case ready meat from their traditional in-store butchers, a trend which is expected to occur in Australia and other parts of the world. Case ready meat decreases the cost of production, is more efficient to distribute and provides enhanced quality control and product consistency, while also allowing the Company to develop its own brand internationally”.
“We see major growth opportunities in Asia and the Middle East. Population growth in these areas exceeds the rest of the world and governments are moving to lower barriers to beef imports, especially from countries like Australia”, he added.
World consumption of beef is growing with the increasing global population. There is also change in consumer perceptions, with an increased demand for convenience and a changing diet within many of the countries in South East Asia.
Australia is the world’s largest beef exporter, shipping 884,000 tonnes in 1999 (representing 22 percent of the total global exports), which reflects the country’s competitive advantages through lower production costs and high food safety standards.
Mr Holmes à Court said “The Offer of the AACo shares will allow investors the opportunity to take part in the resurgence in popularity of Australian beef in the domestic and overseas market.”
Futuris has announced a capital reduction of 4 cents per share, which is subject to shareholder and noteholder approval on 26 July 2001. Eligible Futuris shareholders may apply the proceeds of this capital return to AACo shares. Both eligible Futuris shareholders and noteholders will be provided with a priority to subscribe for up to $2000 worth of shares at the Retail Price.
Credit Suisse First Boston and JB Were are the Joint Lead Managers of the Offer. The Co-Lead Managers are Hartley Poynton, Wilson HTM, and Co-managers are Bell Securities and BNP Paribas.
For further information:
Mr Les Wozniczka | Mr Peter Holmes a Court Australian Agricultural Company (02) 9293 2880 |
Note: The formal offer for shares in AACo will be made in the prospectus dated 6 July 2001 lodged with ASIC on that date. Anyone wishing to acquire shares in AACo will need to complete the application form accompanying the prospectus. A copy of the prospectus can be obtained through AACo’s website – www.aaco.com.au – or by calling a toll free number 1800 550 070. The Corporations Law prohibits AACo from processing applications in the seven day period after the date of lodgement of the prospectus. This period may be extended by ASIC by up to a further seven days. Applications received during the exposure period will not be processed until after the expiry of that period. No preference will be considered on applications received during the exposure period.
