Sources close to the Australian Agricultural Co say there is no substance behind an elaborate scenario put forward in this morning’s Weekend Australian suggesting that the company may be de-listed and broken-up into separate cattle production and meat processing/ marketing units.
The report in The Australian suggests one of AA Co’s largest investors, UK billionaire Joe Lewis, is behind a move to seize majority control of the company. Mr Lewis currently holds about 12.8 percent of AA Co stock, up from about 7.6pc at the time of the last annual meeting.
The report suggests an ‘ugly boardroom battle’ was occurring between AA Co’s biggest foreign shareholders that could ‘lead to the breakup of the cattle empire.’
Apart from banks, HSBC (17.4pc shareholding at May’s AGM) and Citicorp (11.2pc), the major foreign shareholders are the IFFCO/Felda consortium (16.8pc) and Joe Lewis’s Southeast Point Ltd (12.8pc).
The Australian suggested that Mr Lewis was looking to break-up the company through a share issue and capital restructure which would involve separating AA Co’s new $85 million Darwin abattoir and beef supply chain into Asia from its loss-making cattle production base.
It suggested that many of the company stations could be split up and sold off to ‘return profits to frustrated major shareholders.’
The Australian suggested that the shock departure of managing director David Farley on Wednesday, appeared to have occurred because he was a “victim of ambitions of the company’s major shareholders.”
“It is understood that for the past four weeks, Mr Farley had been fighting an increasingly difficult battle to stop the collapse of his vision for a large integrated Australian public company growing cattle in Australia’s north, turning them into beef and supplying Indonesia and China through Darwin.”
The Australian said Joe Lewis’s ‘secret plan, known only to AA Co’s seven board-members’, was for a new capital raising discount share offer that would dilute the holdings of existing shareholders, allowing his Tavistock Group to tighten its grip.
AA Co sources contacted by Beef Central this morning denied that there was any substance behind the scenario painted in the Australian, saying the only real shred of truth in the article was “the fact that AA Co was Australia’s oldest listed company.”
"It would be completely illogical to separate the Darwin abattoir from its largest secure source of cattle supply," the contact said.
The source said the company’s Darwin abattoir was still on track, and all going well, was six months from opening.
Similar break-up rumours about AA Co have circulated for some months, but on scrutiny, appeared to lack foundation.
Speaking to The Australian yesterday, AA Co chairman Don McGauchie denied there was a boardroom battle going on for control of the historic company, which is suffering from a languishing share price, closing at $1.16 last week for a market capitalisation of $363 million — just half its net tangible asset value at a time when world beef prices are at record levels.
He said it was a "complete fabrication" to suggest the company's two biggest foreign shareholders were deeply divided about AAco's future direction, as reported in The Weekend Australian, or that either was pushing to sell off its 13 vast cattle stations, 7.2 million hectares of land and 676,000-head cattle herd and split the company in two.
Mr McGauchie said reports of a bitter board rift over whether the company should focus solely on becoming a meat exporter and processor and hive off its loss-making pastoral empire were also "categorically wrong".
Mr McGauchie insisted last night that Mr Lewis and AA Co's other major shareholder, the Malaysian-Middle Eastern Felda-IFFCO consortium with a 16.9 per cent stake, were both in "total agreement" with the decisions and strategic direction of AACo as decided by its seven-man board.
Mr McGauchie said that although he had no doubts, he had spoken with an unnamed Tavistock representative over the weekend, who confirmed that Tavistock did not intend to make a "play" for AACo and did not want to sell off its cattle production arm, leaving it as pure meat processor and exporter to Asia through its new $85 million abattoir in Darwin.
"Tavistock invested in 2011 and Joe Lewis said then his reason was that he saw the value and uniqueness of the business as a vertically integrated beef company with the scale to supply meat to Asia," Mr McGauchie told the Australian yesterday.
AACo Statement to ASX
AACo released the following statement to the ASX this morning:
Response to Media Speculation
In response to media speculation over the weekend relating to strategic initiatives currently being contemplated by Australian Agricultural Company Limited (AACo), the Board of AACo advises that any suggestion of a break-up of the company’s assets is incorrect.
Further, a Tavistock Group representative has confirmed that Tavistock’s view is entirely in accord with the Board.
The Board is resolute and unanimous in executing AACo’s strategy of building a vertically integrated company, supplying red meat into the global market, in particular Asia. To do this, AACo requires the ability to produce high-quality beef on its properties, and then be able to slaughter, market and transport efficiently.
In previous ASX announcements, the company has explained that achieving the supply-chain integration that is central to the company’s strategy will be best achieved at this time if both the proposed Darwin Abattoir and its existing cattle properties are held by the ASX-listed AACo.
In order to ensure AACo’s balance sheet is structured appropriately to execute the company’s strategy, including construction of the Darwin Abattoir, the AACo Board has in the past considered, and is currently considering, options available to strengthen the balance sheet – which could include a capital raising. While the structure of any potential share offer (including the size and type of any raising) has not been finalised, the company is having discussions with potential underwriters and sub-underwriters.
The Board will make an announcement in relation to any decisions when appropriate.
- Beef Central wrote extensively about Joe Lewis’s arrival on the AA Co shareholder register in this earlier report, "UK mystery man on AA Co share register."