Property

Chinese buyer secures CPC’s Carlton Hill in leaseback deal for $100m

Jon Condon, August 3, 2016

CONSOLIDATED Pastoral Co has entered into a sale and leaseback arrangement on its Carlton Hill Station in the Ord River District of Western Australia’s northeast corner.

The deal, worth a total of around $100 million, is far from ‘just another’ grazing property acquisition by Chinese interests, however, being directly linked to the Chinese investor’s interest in developing irrigated cropping as part of stage two of the Ord River Dam irrigation area.

Under the agreement, CPC will lease back most of the 476,000ha of country on Carlton Hill for the next ten years, while an area of about 14,000ha will be developed to irrigated cropping.

Beef Central understands the deal was worth $70 million bare, plus a value of $30 million attributed to the ten year leaseback agreement on the remainder of the property – giving a total transaction value of $100m. No cattle will change hands under the agreement.

Brahman cattle Carlton Hill station. Source: CPC

Brahman cattle Carlton Hill station. Source: CPC

Given Carlton Hill’s location close to the Northern Territory border alongside the enormous Ord River dam, and areas of deep, rich, fertile soils, it was always seen as a likely target for future land-use changes, especially as the irrigation scheme heads for stage two.

‘Win-win’ result

The result represents a big ‘win-win’ for CPC, freeing-up considerable capital tied up in the land, while it continues to utilise the majority of the holding for grazing purposes, much as it has in the past.

Carlton Hill plays an important part in CPC’s live export operations, breeding and growing about 20,000 steers and heifers a year in readiness for export to Asia through the nearby Port of Wyndham. In total the property runs around 50,000 head.

Buyer is the Chinese company Shanghai Zhongfu’s Australian entity, Kimberley Agricultural Investment (KAI), which was earlier awarded the land, water and development rights for the Ord Irrigation Area stage two, for the next 50 years.  The sale has received Foreign Investment Review Board and West Australian government approval.

Troy Setter

Troy Setter

CPC chief executive Troy Setter said the decision to undertake a sale and leaseback of Carlton Hill was consistent with the company’s strategy to leverage its assets whilst staying true to its core competency, which is beef and cattle production.

“The transaction is value accretive for both businesses,” he said.

“It will help to strengthen CPC’s North Australian portfolio, the gateway to the rapidly expanding Asian markets, and provides KAI with access to additional fertile land for irrigated cropping.”

He said proceeds from the transaction will be reinvested for growth in CPC, including in operational improvements to increase cattle and land efficiency, and further investment in its value chain to move closer to end customers.

“Ultimately this deal will support the next phase of CPC’s transformation from a producer to a more vertically-integrated supplier of cattle and beef and will increase exposure to international markets with higher and more stable international beef prices,” Mr Setter said.

“We are extremely pleased to be partnering with KAI who are critical to the future of development of the Ord region, and look forward to working with them on the ongoing success of Carlton Hill.”

For Chinese irrigation investor, the acquisition of Carlton Hill, giving access to the 14,000ha area of arable country, give sit the critical mass to go ahead and develop the next stage of the Ord irrigation scheme.

Chief executive of KAI, Mr Yin, said his company was looking to continue developing land for intensive irrigated farming adding scale to the region and KAI’s existing operations. On the back of this acquisition, KAI will be exploring other integrated business opportunities within Northern Australia.

Asked if there was any prospect of integration of KAI’s irrigated cropping interests with CPC’s cattle interests, Mr Setter told Beef Central that CPC’s relationship with KAI as “not just transactional.”

“It’s a partnership, and we’re going to explore opportunities that may be mutually beneficial to both companies, to increase both cropping and cattle production,” he said.

KAI currently has no exposure to the cattle or beef industries either in Australia or overseas, but Mr Setter is confident that synergies may emerge.

He said the funds raised from the transaction would be re-invested in existing operations, and perhaps other opportunities outside the existing portfolio.

“With further development of the Ord cropping infrastructure, there’s likely to be further opportunity to expand cattle production in the region,” he said.

CPC is understood to have negotiated with several companies looking at the next phase of development of the Ord irrigation scheme, before agreeing to terms with KAI.

Carlton Hill manager Glen Brooker will remain in his current position.

 

 

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Comments

  1. Angela mooney, August 4, 2016

    Very good for kununurra,but it would have been good if Australia company bought up the same deal

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