Listed Australian dairy company raises capital for acquisitions

Australian Dairy Farms Group, the first ASX-listed dairy company, has launched a A$16 million ($13 million; €11 million) capital raising effort to pay for the purchase of three dairy farms.

The farms, which ADF has agreed to buy near existing properties in southwest Victoria, will double its milk production capacity to over 20 million litres a year to make it one of the region’s biggest dairy producers, according to an announcement.

The capital will be raised through a A$15.7 million conditional share placement and a A$2 million share purchase plan. The company is selling 78.4m stapled securities for A$0.20 each and already has “firm commitments from institutional and sophisticated investors” in Australia and overseas, according to the announcement. At the same time the company is selling A$2 million of shares under the Share Purchase Plan for other investors in Australia and New Zealand at A$0.20 a share.

The deal is expected to close on 22 June. Bell Potter Securities acted as lead manager on the offering.

“This is a transformational acquisition for the group, effectively doubling our milking platform and production and getting us well on the way to achieving our stated 50m litre target,” said Adrian Rowley, director at ADF. “We acknowledge the continued support from international and domestic institutional investors for the capital raising and are pleased to be able to welcome several new major Australian and NZ investors to the share register. We continue to see strong interest in our dairy aggregation strategy, as investors continue to focus on global food security and growth in demand for Australian dairy products from Asian countries.”

Private capital investments into Australian dairy have been few and far between. Aquila, the German real assets fund manager is still fundraising for its first dairy fund and AgCap, the manager behind the A$150 million ($139 million; €101 million) Sustainable Agriculture Fund, a diversified agriculture fund that is in the fifth year of a 10-year life, has yet to formally launch its own dairy fund a year after Agri Investor first reported on it. AAG Investment Management did successfully arrange a sale and leaseback investment deal with a Scandinavian pension fund and Murray Goulburn, the dairy processor, last year.

Australian dairy has typically been lambasted for its inefficiency and high capital costs relating to cattle feed.