AAC – Australian Agricultural Company

On the block, price of AA Co just went up

Going, going … Brunette Downs is one of 24 cattle stations and two feedlots owned by Australian Agricultural Company. Photo: Brendan Esposito

Email Print Normal font Large font AdvertisementAdvertisementVanda Carson

December 20, 2007

AUSTRALIAN Agricultural Company has increased the valuation of its massive land portfolio on the eve of a bidding war triggered by the imminent sale of a majority stake in the company.

The company told the market yesterday the value of its properties – which are mostly in the country’s far north – had increased by $180 million in the past six months.

AA Co commissioned valuations of its 24 cattle stations and two feedlots after the company was effectively put on the auction block in October when Futuris announced it wanted to sell its 43 per cent stake, which was worth $344million at yesterday’s close.

The properties sprawl over nearly 8 million hectares of land in Queensland and the Northern Territory.

The valuations of the independent Herron Todd White were expected to boost net tangible assets per share by about 49c to about $2.87, the company said.

Assets per share have increased by 41 per cent in three years despite a depressed cattle market and high grain prices.

The scarcity of good beef producing properties and the worldwide trend towards higher-protein diets are pushing prices to historic highs.

One AA Co property alone – Wrotham Park Station in the Queensland Gulf Country – produced an average of 14 per cent annual capital growth over the past 21 years.

The Northern Territory and Queensland have also been receiving better rainfall than southern regions, thanks to monsoon conditions over summer.

Market observers have said the assets were likely to be sold in one line.

Potential buyers include Macquarie Pastoral Fund and the local beef producer Teys Brothers as well as overseas interests such as Cargill of the US and Brazil’s JBS group, which bought the meat processor Australian Meat Holdings earlier this year.

Analysts believe shareholders could receive up to $3.77 a share if a full takeover bid is made, 18 per cent up on yesterdays close.

Futuris, whose Elders subsidiary owns the stake, decided to sell because the holding was not spinning off enough cash and the company wanted to focus on its forestry and telecommunications operations.

AA Co recently moved away from selling generic meat to meatworks and into branded beef and wagyu beef for the Japanese market, as a way to increase profit margins. Its shares closed up 2c at $3.21 yesterday.