January 10, 2019

Consolidated Pastoral Company (CPC) has sold three cattle stations in the Northern Territory and Western Australia to Vietnamese investment group Clean Agriculture and International Tourism (CAIT) in a deal valued at $135 million.

Held by UK private equity firm, Terra Firma, rumors about the sale of the CPC portfolio have circulated since November of 2014. In October 2018, CPC began the process with the sale of Nockatunga Station, a bullock fattening operation located in southwest Queensland, to the Harris family’s Cleveland Agriculture.

Prior to the sale of Nockatunga, CPC  owned and operated a portfolio of 16 cattle stations with a carrying capacity of 400,000 head of cattle across 5.5m hectares of land in Australia. The company also holds an 80 percent interest in Juang Jaya Abdi Alam (JJAA), which owns and operates two feedlots in Indonesia.

This latest sale includes a linked cluster of stations: the Auvergne and Newry Stations in the Northern Territory, and the Argyle Downs Station in Western Australia. Combined the properties total 740,000 hectares (1.8 million acres) of land, 52,000 head of cattle, as well as a plant and all equipment.

“The divestment of this cluster of three stations at a premium to net asset value reflects the quality of the stations and the investments that have been made in infrastructure in recent years,” said Troy Setter, chief executive, CPC. “Our station management and staff look forward to working with CAIT to continue to run the properties and manage the land.”

Diversifying

CAIT is a part of TH Group, a Vietnamese conglomerate active in agriculture, food, finance, and pharmaceuticals which accounts for 40 percent of Vietnam’s fresh milk production. Moving forward CAIT states that its plans for the properties include expanding into cropping and non-pastoral uses.

“CAIT’s vision to continue to invest in the properties and diversify into high value cropping and other non-pastoral use business is exciting,” said a company spokesperson.

Likewise,  despite selling off its portfolio, (CPC), one of the largest cattle producers in Australia, is diversifying its operations through expansion into crop production in the northern region of the country.

There exist a number of drivers behind the decision to expand into cropping, according to Setter, including the establishment of additional channels of income.

“…whether its sorghum hay or sorghum grain, or whether the next crop following the sorghum could be something like mangoes or melons. We’re still working through that, but we’re certainly committed to developing and looking at all opportunities in northern Australia,” Setter told ABC.

Additionally, the addition of cropping operations and higher self-sufficiency in cattle feed could make CPC stations more attractive on the market.

In a Global AgInvesting Europe 2017  presentation on the key risks and effects on farmland returns, David Sackett, managing director at Growth Farms Australia, highlighted the need for investors in Australian pastoral assets to focus on properties that bring the potential for optionality if the markets change.

Setter told ABC that the company is also open to possibly growing cotton or corn on some of its other stations.

“Some of those opportunities were developed in the 1990s, but not executed on, and hopefully over the next couple of years we can start to [take up] these opportunities.”

What Remains

After this sale, the remainder of the CPC portfolio will consist of 12 geographically diverse cattle stations with a carrying capacity of 325,000 head of cattle, totaling 3.9 million hectares (9.6 million acres), along with a 90 percent interest in Juang Jaya Abdi Alam (JJAA) – a joint venture that owns and operates two feedlots in Indonesia.

“The fundamentals of beef are underpinned by strong demand dynamics in Asia and around the globe,” said Setter. “The business remains a compelling platform as a whole as well as attractive in parts, and the sale process continues for both of these options.”

“CPC’s geographically diverse portfolio positions the business well in the current market. The business is benefiting from investments in fencing and watering holes as well as genetics, and our Indonesian supply chain provides a route to market in a large high growth market.”

Lynda Kiernan