Terra Firma Capital Partners, the UK buyout firm headed by Guy Hands, has agreed to buy the vast Australian cattle ranches owned by Sydney-based billionaire James Packer in a deal worth about A$425m.
Terra Firma will buy Mr Packer’s 90 per cent interest in Consolidated Pastoral Company, Australia’s second largest beef producer with over 300,000 cattle.
The 17 ranches owned by CPC cover 5m hectares in the Northern Territory, Western Australia and Queensland - an area equivalent to about 40 per cent of England.
Mr Packer is attempting to build up a global casino business after selling the bulk of his Australian media assets to CVC Asia and CVC Capital, the sister private equity groups, near the top of the cycle.
However, Mr Packer’s aggressive expansion of his gaming business – which now include operations in the US, Canada, Australia, the UK and Macao – also coincided with the market peak and a number of his investments are now struggling.
The cash proceeds from the CPC sale will help shore up Mr Packer’s capital position.
Mr Packer’s late fatrher Kerry began the company in 1983 with the purchase of the Newcastle Waters Station in the Northern Territory - the station where James was later sent after finishing school to "toughen up" by working as a jackaroo, or ranch hand.
Terra Firma this month said it had written off half its €2.6bn (£2.3bn) investment in EMI, the music group, accepting the likelihood of losses on one of the most eye-catching deals struck during the credit bubble.
Despite that setback, CPC, Mr Hands’ first deal in Australia, underlines Terra Firma’s efforts to strike deals during difficult economic times.
Terra Firma was attracted to CPC because of its land assets, cash flows and the opportunity to expand the exports of Australia cattle to Asian markets.
Mr Hands said beef was a vital export industry for Australia.
"The long-term demand for beef and the competitiveness of CPC makes this an exciting investment opportunity for Terra Firma," he said.
The remaining 10 per cent of CPC will continue to be owned by Ken Warriner, the company’s chief executive.
Mr Warriner said Terra Firma had invested in businesses for the long-term and the private equity group was committed to CPC’s success.
Rabobank, the food and agribusiness bank, will provide debt finance for the deal.