Australia’s northern cattle industry is being transformed like never before.
If everything proceeds as announced, there will be more sales to come, following the sales in the past two months, of 31 stations carrying about 600,000 cattle – for more than $1.1 billion.
With Futuris offloading all but eight percent of its former 43pc holding in the Australian Agricultural Company, and Consolidated Pastoral Company’s 17-station sale to UK investment group Terra Firma close to culmination, the past 60 days have been the most hectic in Australian rural property history.
Ironically, the buying frenzy has occurred during a global financial crisis that has shredded asset values for everything, it seems, except Top End cattle stations, most of which have experienced at least two years of declining profitability.
It prompts the obvious question: Can the new buyers get a reasonable return on their investments?
Some believe not.
A string of purchases by the Macquarie Pastoral Fund, in particular, which has acquired up to six stations in the past few weeks, has put a new floor under values.
And with plenty left in Macquarie’s stated $1.3b property acquisition war chest, more purchases seem certain.
"Everybody is watching with great interest," Don McDonald, the principal of his family company, MDH Pty Ltd, which owns 11 cattle stations in the Gulf of Carpentaria and North West Queensland, said.
"We would be fearful to pay those sort of prices," he said of sales like the $169 million paid by Macquarie for three Georgina Pastoral Company properties in the Northern Territory and Queensland, and $152m for three of AA Co’s seven Queensland Gulf stations.
But Peter Hughes, one of the two Georgina partners and a beneficiary of Macquarie’s buying spree, is delighted.
"It’s great we can get those prices," Mr Hughes said.
"They were very close to valuation and represent good value.
"It’s not just the properties they’ve bought. They’re also inheriting a very good management team, which is worth a lot."
Several different factors are driving the ownership changes.
AA Co’s sales and purchases - if finalised - represent a reshuffling of its property portfolio to take advantage of the buoyant live cattle trade and relatively strong demand for grassfed cattle, while slashing up to two-thirds of its $425m debt.
"We have made strategic changes in our production mix," AA Co chairman, Charles Bright, said.
"We’ve laid the support for our belief that grassfed beef is going to be in greatest demand.
"The prices we received were all equivalent to net tangible asset value (about 70pc higher than AA Co’s sharemarket value).
"We have therefore demonstrated the real value of these properties."
Melbourne barrister, Allan Myers, who sold his two NT stations - Litchfield and Tipperary - to AA Co and pocketed a net $15m, now has 19.9pc of the company and a big say in its future, if not effective control.
He can now buy an extra 3pc equity every three months without having to make a takeover offer.
Macquarie, which bought Queensland stations Armraynald at Burketown and Davenport Downs in the Channel Country, and Walhallow at Tennant Creek from Georgina Pastoral Company for $169m, may be the buyer of Clonagh, Kalmeta and Gregory Downs from AA Co for $152m.
If so, Macquarie will have acquired a footprint of three million hectares and more than 150,000 cattle, projecting it into the top 10 cattle companies in Australia.
A secretive new player, Primary Holdings International, is thought to have bought Welltree and LaBelle Downs from Peter Camm last October for about $75m. It has since entered into a heads of agreement to buy five undisclosed stations from AA Co for $250m.
While the property identities are under wraps, they are likely to be Canobie, Dalgonally, Lawn Hill, Wondoola - all north or north-east of Mount Isa - and Carrum near Julia Creek.
AA Co is understood to have entered into an agreement to manage the 120,000 head of cattle on them.
