Canada’s Public Sector Pension Investment Board makes billion-dollar play for Australian farmland

The world-famous Royal Canadian Mounted Police are making a billion-dollar charge for Australian farmland.

THE world-famous Royal Canadian Mounted Police are making a billion-dollar charge for Australian farmland.

Canada’s Public Sector Pension Investment Board, which manages the superannuation funds of the nation’s public service, armed forces and the 30,000 member-strong mounted police, last week launched an $854 million takeover bid for the ASX-listed Webster Limited — Australia’s fourth-oldest company and one of the ­nation’s biggest landholders.

The move came just weeks after PSP was named as the joint buyer of cotton giant Auscott’s Midkin vertically integrated aggregation in northern NSW, in a deal estimated at about $300 million, and is the latest in a string of purchases for the Montreal-based fund.

The Webster deal will be subject to a shareholder vote. Should it be endorsed the sale will take PSP’s investments in Australian agriculture in the past few years to well over $1.5 billion, either directly or through joint ventures.

In the past year alone, PSP has paid:

$208 MILLION for a majority stake in the 44,000ha BFB portfolio of cropping farms around Temora in southern NSW.

$132.7 MILLION in a joint venture for the 9593ha Bengerang and Darling Farms aggregations in northern NSW.

$16 MILLION for a 519ha vineyard at Cullulleraine, west of Mildura.

PSP also has financial interests in Hewitt Cattle Australia, which runs 11 cattle stations in Queensland, NSW and the Northern Territory, the Stahmann Farms walnut and almond business in NSW and South Australia and Daybreak Cropping with its five aggregations totalling more than 45,000ha in Victoria, NSW, Queensland and Western Australia. Through Hewitt Cattle Australia it is also a shareholder in the Arcadian Organic and Natural Meat business.

PSP currently owns a 19.1 per cent stake in Webster and as part of the takeover proposes to spend $724 million buying the company’s remaining shares for $2 each — a 57 per cent premium to last Wednesday’s closing share price of $1.27 ahead of Thursday’s announcement.

This bid values the company at about $854 million. Webster shares opened yesterday at $1.95.

The proposed deal is one of the biggest in Australian agriculture in recent decades, more than doubling the high-profile sale of pastoral icon S Kidman and Co to an Australian-Chinese consortium for $386.5 million in 2016.

Founded in 1831, Webster has about 17,100ha of cropping, 320,000ha of livestock and 3000ha of orchard ventures in southern NSW, South Australia and Tasmania, as well as significant water assets totalling more than 153,000 megalitres.

Under the PSP bid, which has been unanimously endorsed by the Webster board, the company would be delisted from the ASX.

In a statement, Webster managing director and chief executive Maurice Felizzi said the two companies had “complementary, long-term growth aspirations” and PSP was “a logical and suitable owner of the Webster asset portfolio”.

Canada has become a major investor in Australian agriculture in recent years through companies and funds, including the Alberta Investment Management Corporation and the Ontario Teachers’ Pension Plan.

According to the Foreign Investment Review Board, Canada was the biggest investor in Australian farmland in 2017-18, with investments worth $2.6 billion, ahead of China ($1.6 billion) and the US ($776.3 million).

Wide vision: Bengerang cotton farm, near Moree, part of 9593ha of land PSP bought in a joint venture last year for $132.7 million.

CBRE Agribusiness regional director Danny Thomas said while Canada had been a more high profile investor in recent years, they were part of a broader investment trend stemming from North America.

He said as well as a favourable exchange rate, Canadian investors were attracted to Australia from a sovereign risk perspective with both nations part of the Commonwealth, boasting Westminster parliamentary systems and with similar rules of law.

“More broadly there is a cultural alignment … we are the southern hemisphere version of them — there are so many similarities,” Mr Thomas said.

“They understand agriculture and natural resources because of what they’ve got at home. They can also see past the current dry conditions and are happy to invest in Australia in the longer term.”

PSP Investments has $A187 billion in assets under management and plans to grow that to $A278 billion by 2028. Its global investment in natural resources — including agriculture and timber and oil and gas — is $7.6 billion globally. Australia accounts for 58 per cent of its “geographic diversification”. It also has agriculture interests in Brazil, Canada, Chile, Newfoundland, New Zealand and the US.

PSP’s proposed takeover of Webster has again stirred the debate about the level of foreign capital in Australian farmland. About $7.9 billion of agriculture-related assets were sold to offshore investors in 2017-18, up from $7 billion a year earlier and $4.6 billion in 2015-16.

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Agriculture Minister Bridget McKenzie said the PSP-Webster proposal would be subject to Foreign Investment Review Board scrutiny “to determine whether it is in the national interest”.

“Where it is in the national interest foreign investment is an important contributor to Australia’s economy and standard of living,” Senator McKenzie said.

“Foreign investors clearly understand the advantages of investing in our agriculture sector.

“I would like to see more Australian investment funds and individual investors consider the long-term value in Australian agriculture.”