Agribusiness

Grainfed supply chain Mort & Co plans public listing after IPO

Beef Central, 24/02/2016

mort-logoLOTFEEDING company and integrated grainfed beef supply chain Mort & Co is planning a public float next year, following an Initial Public Offering.

An Initial Public Offering (IPO) is the first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.

Ahead of the proposed Australian Stock Exchange listing late in 2017, American multinational investment bank Moelis & Co will become a ‘cornerstone’ investor, investing $5 million alongside a syndicate which hopes to raise around $20 million.

A successful public float by Mort on the ASX would add another red meat investment option for investors. Currently the only channels for public investment in the beef industry are via the Australian Agricultural Co (code AAC on the ASX website) or via ‘proxy’ investments in the beef supply chain via companies like Elders (ELD), or more recently, Wellards (WLD).

Based on Beef Central’s recent Top 25 Lotfeeders report, Mort & Co is the fourth largest beef cattle lotfeeder in Australia, but could advance to second position once current and planned expansions are complete.

The company deals in cattle procurement, transportation, lotfeeding, custom-kill beef processing, brand development and marketing. Mort’s primary business involves acquiring young cattle, implementing a feeding program and generating earnings upon sale.

Charlie Mort

Charlie Mort

Mort & Co. headed by founder Charlie Mort (pictured) owns and manages three feedlots across the eastern Australia In November the company launched its own beef brand, The Phoenix Range.

Moelis says new equity is being raised via a syndicate to help accelerate Mort & Co’s growth prior to the IPO on the Australian Securities Exchange.

The new capital will be used to expand cattle feeding assets and some working capital. The investment is expected to increase cattle sales by 25pc from 180,000 a year to 225,000 a year.

IPO funds will be used to expand Mort’s operating capacity and capitalise on the increasing demand for Australian beef, particularly from Asia.

Moelis’ investment will include its executives and its existing managed funds, alongside the syndicate, which has a forecast internal rate of return expected to be around 25pc a year, including a cash dividend of 4.2pct a year after fees.

Existing shareholders and management who have a significant investment in Mort are not selling down any shares as part of the opportunity, Moelis told Businessspectator.com.au

A dividend for the 2016 financial year will be paid to all investors in February next year, equating to 40pc of annual net profit. Investors will be acquiring equity at a PE ratio of around 6.5 times estimated 2018 earnings, the first full-year of earnings contribution post expansion.

The syndicate’s forecast internal rate of return is expected to be around 25pc a year, including a cash dividend, and Moelis forecasts a PE ratio of around 6.5 times 2018 earnings.

Expressions of interest to invest in the syndicate are due by March 3, with a minimum of $100,000 required.

Click here to view Beef Central’s earlier Top 25 Lotfeeders report on Mort & Co.

 

Source: businessspectator.com.au, Beef Central

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