Rural Funds Group raising $150m to expand cattle property

Rural Funds Group raising $150m to expand cattle property

13 July 2018

The listed Rural Funds Group (RFM) is raising $150 million in fresh equity to help expand its cattle property empire in the sector’s first raising this year, reports The Australian.

The Rural Funds property deal covers five feedlots across Queensland and NSW and will see Rural Funds Group buy the underlying properties for $53m from JBS Australia, Australia’s largest lot feeder and cattle processor.

JBS will continue to operate and manage the feedlots and the deal will not affect JBS’ grain-fed cattle producer partners and staff. JBS Australia processes more than one million head of cattle annually and exports product to more than 50 countries around the world.

Under terms of the lease agreement, JBS Australia will continue to operate and manage the feedlots for up to 10 years, with an option to terminate the agreement at any time after five years.

JBS Australia CEO Brent Eastwood said that these arrangements are fairly commonplace in the Australian agricultural sector and the agreement has no impact on grain-fed producer suppliers to JBS Australia. “We are excited to enter into a strategic partnership with Rural Funds Management,” said Brent Eastwood, JBS Australia CEO.

“The agreement will allow JBS Australia to continue ‘business as usual’ with our customers and grain-fed cattle supplier partners, while establishing a long term relationship with one of the country’s most respected Australian-owned funds to pursue future opportunities.”

David Bryant, Managing Director of Rural Funds Management commented, “The strategic partnership announced today, provides Australia’s largest meat processor a consistent supply of grain fed cattle. In turn, the Rural Funds Group has introduced to its portfolio, a substantial and highly capable new counterpart, that will contribute to growth of fund assets and income.”

The facilities have a combined capacity of 150,000 Standard Cattle Units which represents approximately 15% of Australia’s lot fed cattle capability.

The overall transaction is substantial, with banks believed to be providing about $250m worth of finance to back RFM.

This will be used for cattle purchases, feed and other costs associated with finishing the cattle on the feedlots.

The raising is being led by investment bank UBS and signals a further push into the cattle property by the trust after its initial move last year. The group has undertaken multiple capital raisings, each at a higher price than previously, with the latest offer at $1.95 a share.

Rural Funds already owns an overall rural land portfolio worth about $700m and bought three cattle properties — Natal Downs, Longton and Narellan — in northern Queensland last year.

In May, Rural Funds extended its push into the beef sector with the acquisition of Comanche, a 7600ha breeding and backgrounding property near Rockhampton, Queensland for $15.7m.

The latest deal will help diversify Rural Funds’ existing northern Australian cattle assets, which include 225,000ha breeding properties Oakland Park and Mutton Hole and 17,500ha finishing property Rewan.