QIC picks up controlling stake in NAPCO

The government-owned investment manager has bought a large stake in the 5.8m hectare cattle companies.

The Queensland Investment Corporation (QIC), the Queensland government-owned investment manager, has agreed to acquire an 80 percent interest in the North Australian Pastoral Company, according to a statement.

NAPCO is one of Australia’s most significant cattle companies, managing 5.8 million hectares across Queensland and the Northern Territory and around 178,000 head of cattle, as well as running an in-house integrated supply chain. The company exports chilled beef as well as selling to the domestic market.

QIC is acquiring its stake from NAPCO’s largest shareholder, the Foster family, which will retain an interest of around 20 percent, as well as acquiring the 34 percent currently held by UK-listed MP Evans. An offer will be made to other minority shareholders to acquire their shares as part of the transaction, as well as offering them the opportunity to retain an interest in the business, QIC said.

Last month Private Equity International sister title Agri Investor reported that QIC was close to buying NAPCO in a transaction that could value the business at A$400 million (€258 million; $295 million).

QIC declined to comment on financial details of the transaction.

The fund has been actively pursuing opportunities in agriculture and beef since the end of last year, and this is the first big direct agricultural investment it has made. 

“We’ve been looking at ways to invest in the food macro story in Asia-Pacific,” QIC global head of private equity and the head of QIC’s NAPCO transaction team Marcus Simpson told PEI.

“Asia is the demand, Australia has a great reputation for supplying clean, healthy food, and we have a lot of land and not very many people. It’s been a theme that we’ve been looking at for years now for opportunities to invest in, and now we finally have in the form of NAPCO the ability to start with a large platform company that we can grow.” 

The investment comes from QIC’s private equity allocation, although NAPCO has “different return drivers and some different expectations than a typical private equity transaction”, Simpson said.

One such difference is the expected hold period. QIC is working to an initial time horizon of 10 years, Simpson said.

“In order to be able to tap into the macro-story – which is a long one, I think they’re estimating that Asia will be about 50 percent of beef demand by 2025 – then we do want to hold this for a longer time,” Simpson said.

“It is going to take time to really build out the supply chain to Asia, and we probably will do some add-ons and continue to invest in the business.”

The purchase takes place against the backdrop of a contentious bidding process for Australia’s largest cattle properties, S Kidman. A Chinese-Australian bid, said to be worth A$371 million, was preliminarily rejected by the Australian Treasurer Scott Morrison as “contrary to the national interest”. S Kidman’s chief executive, Greg Campbell, said the company was now looking for bidders from Australia, New Zealand, the US or Chile, because trade agreements mean the threshold for government review is A$1.1 billion.

In March Australia’s agriculture minister Barnaby Joyce called on the country’s A$1.8 trillion pension fund industry to increase investment into Australian agriculture as foreign investors’ interest grows.

“I truly believe the Australian people want more than 0.3 of 1 per cent of their superannuation invested in agricultural assets,” he told reporters at an Australian Bureau of Agricultural and Resource Economics conference. “We have to make sure that we create a culture where investment in the agriculture portfolio is just as logical as investment in the iron ore portfolio or coal portfolio.”

Recent investments into Australian agriculture by overseas funds include acquisitions of agricultural assets by Canada’s Ontario Teachers’ Pension Plan Board and Public Sector Pension Investment Board, as reported by Agri Investor.

The Alaska State Retirement System, the Alberta Investment Management Company, the Second Swedish National Pension Fund (AP2), German pension fund Ärzteversorgung Westfalen-Lippe (ÄVWL) and TIAA-CREF all invested in Australian farmland or forestry at least four years ago, according to international non-profit Grain.