ARC capital for Kidman buy ‘will be raised locally’

James Nason, 13/04/2016

Australian Rural Capital, the Australian fund partnering with frontrunner China’s Shanghai Pengxin to buy S. Kidman and Co, is currently capitalised at around $4 million.

ARC will need to raise an estimated $70m t0 $80m to fund the 20 percent stake it is reportedly set to hold in the final partnership,  should the joint venture bid be successful.

In the S. Kidman and Co process so far, it is believed that no Australian entity has yet made a bid that values the company close to the level foreign interests have been prepared to bid.

That raises the question: from where will ARC’s capital come – Australia, or offshore?

ARC chairman James Jackson, who has deep experience in publicly listed agribusinesses and capital raisings, told Beef Central that the ARC’s external capital will be raised from domestic investors.

The company plans to establish either a ASX-listed investment company or investment trust to conduct the capital raising.

“ARC will hold a piece of that fund or company, and we will be raising external capital, and that money will come from domestic investors,” Mr Jackson said.

“It is our belief that this presents itself as a fairly compelling opportunity for investors to participate in, and that is how we will be seeking to do our funding.

“Obviously we wouldn’t go into this blind, we have quite an extensive network with top end of Australian investment banks, I used to work for one of them, and with large stock broking firms.

“And we have got significant expressions of interest to participate in this transaction from domestic investors, both retail and institutional.”

Mr Jackson, who is also the deputy chair of Elders, said S. Kidman and Co had specific characteristics that made it uniquely attractive to investors, particularly at this point of time in the beef cycle.

Across the beef sector the Kidman brand was by far “the most compelling”, in terms of its rich heritage, track record and longevity.

ARC also sees opportunity to expand the business further along the supply chain.

“Kidman has, up until now, primarily been a spot market seller of their cattle, but with the herd it has we think there is a great opportunity to build greater market capability,” Mr Jackson said.

“That is the option to build that in the business, to reach further down the supply chain, and to add more value.

“Does that mean we are going to race out and buy a whole heap of feedlots and abattoirs?

“Not necessarily, in fact in the industry there is a fair bit of capacity starting to appear in those fixed assets as it is now.”

Mr Jackson said he could not comment publicly on the progress of the S. Kidman sale process or on the specifics of ARCs joint venture with Shanghai Pengxin because the details remain subject to commercial in confidence provisions.



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