International deals featuring two significant Australian farm businesses have capped off a week demonstrating the global interest in the sector.
A Canadian pension company spent $180 million to take a majority share in Ellerslie Free Range Farms, which owns 50 per cent of Sunny Queen — one of the country’s biggest egg producers.
Meanwhile, a bidding war for Namoi Cotton, Australia’s largest cotton ginning company, could be on the cards with a $122 million takeover bid from a Singaporean company.
Rural economist Ben Lyons said it was an indicator of how world markets viewed Australian agriculture.
“It’s a sign of positive outlooks of Australia’s ability to be a consistent, high-quality producer and exporter,” he said.
While consumers were unlikely to notice any change in pricing or availability, he said the influx of cash could lead to better jobs and higher pay for workers.
Uncaging egg investment
PSP Investments is one of Canada’s largest pension funds, managing an investment portfolio for public sector workers worth more than $275 billion (AUD).
Its $180 million stake in Queensland-based Ellerslie Free Range Farms gives it a strategic interest of Australia’s $1.3 billion egg production market, which will become cage-free by 2036.
In announcing the deal, Ellerslie chief executive Greg Quinn said there would be no changes for their 400 staff, customers or suppliers.
“For our people and partners, it will be business as usual,” he said.
“PSP Investments’ global scale will help us accelerate our plans to significantly increase cage free production in the coming years.”
The deal is not PSPs first foray into Australia agriculture – in 2023 it bought the bulk of family-owned, Bundaberg-based Macadamias Australia in a deal reportedly worth $100 million.
“Our investment in this business is very much aligned with our approach of investing alongside best-in-class, local operators who share our values, long-term horizon and commitment to sustainable farming,” PSPs senior managing director Marc Drouin said.
“In many cases, this results in us investing alongside farming families who have cared for their land and animals for generations.”
Mr Lyons, who is a director at the University of Southern Queensland’s Rural Economies Centre of Excellence said consumers should not be concerned by foreign companies buying family agribusinesses.
“Sunny Queen eggs is an example of a family corporate that’s been highly successful,” he said.
“This is just another stage of their progression of their history moving away or selling part of their business to an overseas investor.”
The investment has been approved by the Foreign Investment Review Board.
Cottoning on to opportunity
It was not just food production in Queensland attracting interest.
A few days after the PSP deal was announced, Singapore-based agribusiness giant Olam launched a $122 million takeover bid for Namoi Cotton, Australia’s largest cotton ginning company.
The company owns 10 gins across Queensland and NSW and was already subject to an offer from France-based Louis Dreyfus Company (LDC).
Both Olam and LDC already own gins — which clean and separate cotton fibres from the seeds for processing — in Australia, with the successful bidder likely to greatly increase their share of the $4.5 billion cotton market.
Namoi chairman Tim Watson said the board was considering both offers, which he said showed confidence in the sector.
In a letter released to the ASX, Olam Agri CEO Sunny Verghese said Olam believed that combining Namoi and Queensland Cotton would unlock new opportunities for the two businesses and for Australian cotton growers.
While consumers often worried about the long-term impact of foreign investment, Mr Lyons said the market was not dominated by overseas interests.
“We’ve had a lot of very parochial concerns around Chinese investment, for example, in agricultural assets,” Mr Lyons said.
He said compared to other businesses, agriculture was a risky investment due to climate variability and dollar fluctuations, and few Australian investors could provide the level of capital needed for these deals.
“The only investors that could potentially compete with these types of fairly significant investments are either banks or superannuation funds,” he said.
“We just don’t have as many people with as deeper pockets.”
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