First State Super and WA Super confirm merger

The two funds, which have either already invested in agriculture or have begun to dip their toe in to the sector, will create a A$129bn combined entity in November.

Australian superannuation funds First State Super and WA Super have confirmed that their merger will go ahead, after beginning discussions on a tie-up earlier this year.

The two funds began due diligence in March and will now proceed with the merger, which is scheduled to complete by November 30.

The deal will see First State Super, which is to be rebranded Aware Super in mid-September following its merger with VicSuper at the end of June, add WA Super’s A$4 billion ($2.9 billion; €2.4 billion) in assets under management to its A$125 billion in AUM.

The soon-to-be-renamed fund is currently Australia’s second-largest superfund following the VicSuper merger, behind only AustralianSuper which has A$172 billion in AUM.

First State Super, VicSuper and WA Super all have their origins in their respective states’ public sectors, drawing the majority of their membership base from public sector employees such as teachers and healthcare workers.

First State Super CEO Deanne Stewart said in a statement the merger would provide the members of both funds with real benefits over the long term.

“The recent market volatility and economic downturn have clearly demonstrated why we believe that size and scale matters. As Australia’s second-largest industry fund, we have the ability to invest directly in significant assets and together with a broad and diversified portfolio, this has enabled us to deliver a positive return for our members, despite the current challenging market conditions,” she said.

She added that the fund would look to strengthen its position in Western Australia with the merger, helping to build its position as “a truly national fund.”

First State Super has been making agriculture investments for several years, gaining exposure to water rights, horticulture and livestock.

It owns a portfolio of water rights managed by Argyle Capital Partners, and entered into a sale-and-leaseback deal with Select Harvests to acquire several thousand hectares of almond orchards in 2015. First State Super also acquired chicken broiler business ProTen in 2018 for approximately A$350 million through a special purpose vehicle called FSS Agriculture, which it wholly owns and is managed by Sydney private equity firm ROC Partners.

It expanded ProTen last year through the acquisition of 17 broiler chicken farms from Rural Funds Group for A$72 million. It also holds the 40-year concession to run Victoria’s land titles business alongside an interest in New South Wales’ land registry.

In addition, VicSuper has long held investments in the sector, building on a portfolio of farmland and water entitlements that was managed by Kilter Rural.

WA Super announced its first foray into agriculture investment last year when it partnered with Impact Investment Group to launch the WA Impact Investment Fund, a closed-end vehicle that will focus on impact investing in the state. WA Super was the fund’s founding investor with a A$20 million commitment.

The merger is the latest in a string of deals that has seen consolidation in Australia’s superannuation sector increase in recent years. Other mergers include those between Hostplus and Club Super, and Equip Super and Catholic Super, while QSuper and Sunsuper remain in due diligence talks that would create the country’s largest superfund if they proceed to a full merger.