How does this investment in primary agriculture tie into your overall strategy?
This has a 10-plus year horizon, and is not a typical private equity investment; it's more like what we have done in real estate and infrastructure. That's what some of our clients are looking to match in terms of assets and liabilities.
Just owning land is not the way we wanted to play food and agribusiness – this is ultimately an operational enterprise. We have invested in some other food processing and distribution businesses in the US and Europe, but this is quite different in terms of being a primary production investment.
Why did it take more than three years to find the right agribusiness for your clients?
It's not that that there isn't interest at superannuation funds, it's just that the question is more about how you get exposure and what exposure you are after. We were looking for a platform of assets we could take an enterprise and business-building perspective with, and that would enable us to have scale. The big supers … are looking for investments they can put A$100 million-plus into.
That hasn't been readily available. The [primary beef] landscape in Australia … is extremely fragmented. Looking at the groups who already have scale, one challenge is how you align yourself with those. A lot of them don't need external capital, so which ones are for sale and what type of transaction is on the table? People have different time horizons and different expectations about how much control they are willing to cede.
NAPCO is a great platform to build upon. We can buy some individual or larger holdings to enhance our portfolio and we were able to get scale immediately.
How do you plan to take NAPCO forward?
This investment is about beef and we will be continuing to explore opportunities around the whole value chain. [NAPCO] provides us with a platform further down the value chain, giving us a lot of room to take advantage of where the industry is today.
NAPCO doesn't have full coverage of the value chain but is breeding through the feedlot. We think that over the next decade the breeding operation [will be] critical. There is a lot of risk from climate and commodity pricing, so over time we also want to de-commoditise our product to generate better margins and move it further down that value chain, building resistance into the company to try and minimise price volatility at any point of that chain.