Processing

Bindaree Beef seeks $100m equity investor

Beef Central, February 2, 2015

Bindaree Beef Logo 2013 - Black

 

AUSTRALIA’s fifth largest beef processor, Bindaree Beef, may be seeking a strategic foreign investor to make a $100 million cash injection in an effort to expand the business’s processing and beef export capacity.

The Australian Financial Review this morning reported that the Inverell, NSW business has hired PricewaterhouseCoopers Securities in Brisbane to unearth the “strategically aligned partner” and is calling for first-round bids in late February.

Bindaree is one of Australia’s top five red meat processors with capacity to handle 1300 head of cattle daily.

The Fin Review suggests other part of the business is Sydney-based meat sales and trading business Sanger Australia, which supplies beef, lamb, pork, veal and poultry to more than 40 countries worldwide. Beef Central’s previous understanding was that Bindaree did not hold equity in the Sanger business, but that it was a simple supply/marketing agreement for Bindaree product.

According to a teaser document sent to prospective investors, Bindaree made just over $40 million in earnings before interest, tax, depreciation and amortisation in the 2014 financial year, on $571 million revenue. It is forecasting an ambitious 61 percent EBITDA growth in 2015, but buyers will take some convincing to value the business off such strong numbers.

After an extraordinary 2014 year when beef export processors have enjoyed record throughput and unprecedented profit, market watchers have told Beef Central that the time is ripe to offer any Australian processing business to the market. In essence, the books have never looked better.

The Financial Review’s article suggested industry sources had put a value on Bindaree of $400 million to $500 million, however, the vendor and its advisers “were expected to push for a higher valuation.”

Independent processing sources say the business is worth nothing near that. Using a typical processing sector benchmark trading around 4.5 to 5 times EBITDA, that values Bindaree at more like $200 to $250 million.

“It will be interesting to see whether the strategic investor search ends up in a bid for the whole company,” this morning’s Fin Review article said.

gcgd_BBA_poster2-01“Bindaree told potential investors its current shareholders were committed to the business, but it wouldn’t be the first time a sale process has masqueraded as a strategic stake auction,” it said.

The sale would be pitched around growing global beef consumption, particularly in China’s emerging middle class, the industry’s high barriers to entry, its large-scale processing facilities and Bindaree’s brand portfolio.

Rumours were circulating late last year that another large Australian processor – possibly Thomas Foods International – had, or planned to made an offer for Bindaree, but Beef Central’s inquiries at that time went nowhere. Such a move would have given TFI a much larger ‘footprint’ in the northern Australian region, where its operations are limited to the small Wallangarra plant.

If that bid was genuine, but rejected, the view is that Bindaree’s McDonald family saw an opportunity to take the business to the market in order to “arouse some competitive tension.”

If Bindaree’s relationship with Sanger is simply as a seller of Bindaree’s product, it is difficult to see how the company can support its ambitious claim of 61 percent EBITDA growth in 2015, without controlling the sale of its own product.

If a large overseas injection of capital does emerge, it would make a mockery of Bindaree patriarch JR McDonald’s longstanding public opposition to foreign ownership of Australian beef processing assets.

The Bindaree prospect caps off a 12-month period of extraordinary high movement in Australian processing assets, either in outright sale or cash injections. Recent examples include Harmony Foods sale of Kilcoy Pastoral Co to Chinese interests; V&V Walsh in WA which took on Chinese equity; and Churchill Abattoir’s recent announcement of Chinese equity injection.

 

Is CPC under takeover scrutiny?

The Bindaree move comes as London-based private equity firm Terra Firma considers selling its stake in Australia’s largest privately owned beef producer, Consolidated Pastoral Company, after receiving approaches from Chinese players.

Australia’s free trade agreement with China signed late last year has red meat producers expecting an $11 billion boost from the abolition of tariffs in the next nine years.

 

 

 

 

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Comments

  1. Lee Clarke, February 2, 2015

    Looks like the McDonald family taking advantage of the “new money” that is around for this sector right now off the back of a couple of strong trading years,albeit the valuations quoted if their right seem off the charts for traditionally high volume low margin businesses that have very little predictability when it comes to earnings otherwise if they did seeking capital or succession planning would not be a problem via local private equity or even the ASX hence why the meat processing sector has needed to go offshore for capital or new owners. Maybe JR is seeing the industry is ripe for consolidation which JBS and Cargill’s have started to put down a major footprint just like they have in the US and best to be in early rather than last on the bus.

  2. Producer Murgon, January 30, 2015

    100 million….that should help pay back a few of the debts left by JR and Andrew McDonald in Orange, Murgon, Super Butcher, around the town of Inverell and the 40 million plus received from Federal Government.

  3. Edgar Burnett, January 29, 2015

    And Peter, from what we have seen in recent years, is that likely to happen?

    Interest Rates have been too high for too long in Australia and the sooner the politicians re-instate the QIDC or better still a National Entity similar to the QIDC, the better.

    Businesses that are operating in Australia, that borrow money and that are exporting have been getting three hits to their bottom line because of this factor –
    1) their operating costs are too high indirectly due to the cost of money
    2) their Interest costs are too high directly due to the cost of money
    3) their income has been too low due to the level of the Au$ because of the relatively high Interest Rates

    No wonder their is so much debt in the Bush! And the Australian Banks just keep on creaming money off these businesses.

  4. Peter Vincent, January 29, 2015

    Should foreign investors………any investors, assume ownership of Bindaree Beef, let’s hope they have a conscience and actually contribute to the sustainability of the Australian beef industry.

  5. Edgar Burnett, January 29, 2015

    Isn’t it a great pity that these Australian-owned Companies cannot fund any desired expansions from their own profits and hence retain their financial independence instead of getting tangled up with some foreign Company, usually a multinational that simply does not have the welfare of the Australian suppliers at heart. Where is a National version of a QIDC?

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