Canada’s PSP snaps up Olam water rights for $490m

New deals lock one of Canada’s huge public pension funds in as one of the big players in the Australian water market. 

Olam International founder Sunny Varghese in the company’s almond orchard near Darlington Point in southern NSW. Picture: Aaron Francis

Canada’s powerful Public Sector Pension Investment Board is on the way to owning close to $3bn worth of prime Australian rural and property assets after buying an almond operation and associated water rights in a deal with a total value approaching $900m.

The move will see the North American investment house take control of the country’s largest almond orchard and the water that serves it after they had been held in separate hands for some years.

The property portfolio included eight properties with a total land area of about 20,000ha, of which about 12,000ha were planted to almonds, and traded for more than $350m.

CBRE Agribusiness director Danny Thomas struck the deal after being appointed to sell the almond orchards, but declined to comment yesterday.

They were sold by the Adveq Almond Trust 2, which was backed by a blue-chip consortium of investors including Swiss private equity manager Schroder Adveq and Denmark’s Danica Pension.

It had picked up the orchards in 2014 for $211m via a sale and long-term leaseback agreement with Singapore’s Olam International.

Olam had picked up the orchards for a bargain when Timbercorp collapsed a decade ago.

Olam, one off the world’s top almond producers, had kept the water rights after selling the orchards off in 2014, but on Tuesday unveiled plans to sell them to the PSP Investment Board for $490m.

That aspect of the deal covered 89,085 megalitres of permanent water rights which will be applied to the orchards rather than traded.

PSP Investments has been one of the most active rural investors.

It is in the midst of taking over Webster Limited, which has about 50,000 megalitres of water entitlements.

ASX-listed Webster is chaired by businessman Chris Corrigan and also includes a major nut growing business.

PSP Investments’ play for the business is worth $854m, including debt.

Mr Corrigan and fellow director David Fitzsimons will come out of the deal running a smaller part of the Webster empire themselves.

Webster said last month the market value of its water rights had jumped to about $410m, against their carrying amount of just $186m.

Olam will keep operating the Victorian almond orchards and water rights sold to PSP Investments. It has entered into a new tiered revenue-sharing arrangement with the Canadian fund covering both the orchards and water rights for up to 50 years.

Olam managing director Ashok Krishen said the deal was “consistent with our asset-light approach to tree crop production”.

“This arrangement will enable Olam Orchards Australia to focus on operations and continue to deliver best-in-class products and services to customers,” he said.

PSP Investments head of natural resources, Marc Drouin, said the agreement with Olam was in line with the company’s strategy to partner with best-in-class operators. “It is also quite complementary to our existing permanent crop investments around the world and represents a unique way to add scale, particularly in Australia,” he said.

Olam will receive cash proceeds of $490m and expects to book a one-time pre-tax capital gain of about $311m. The company flagged it would undertake further divestments this year.

Headquartered and listed in Singapore, Olam ranks among the city state’s top 30 largest primary listed companies in terms of market capitalisation.

PSP Investments already has a 19 per cent stake in Webster, and holds a stake in a nuts business via the Stahmann Farms operation

It also has a cattle joint venture with the Hewitt family and is in row cropping through another tie-up with the Robinson family. Its empire building included taking control of the BFB cropping business and an avocado venture with Queensland’s Simpson family.