Major Australian cotton operation Auscott up for sale

Auscott, one of Australia’s oldest and largest integrated cotton producers, has been put up for sale by its American owners.

US-based JG Boswell Company is looking to offload its entire interest in the business, which was founded more than 55 years ago at the outset of the explosion in cotton planting in Australia’s southern Murray-Darling Basin.

PwC Australia has been mandated as lead financial adviser and is running the sale process, with first-round offers due by 12 August.

The business is expected to attract significant institutional interest. One market source speculated that it could fetch more than A$500 million ($347 million; €309 million) if the business and its assets were sold together.

Canadian pension PSP Investments last year bought the 17,300 ha Midkin aggregation and ginning business from Auscott – a significant portion of Auscott’s portfolio prior to the sale – in what is now being viewed as a test of the market ahead of the larger sales process.

PSP has been mentioned by multiple sources to Agri Investor as a natural buyer for the rest of Auscott’s assets should it have the appetite, with other offshore and domestic institutions likely to be assessing the portfolio as well.

Auscott owns and operates more than 22,000 ha of developed irrigation land, as well as other farmland. It also owns more than 143,000 megaliters of water entitlements, which Agri Investor understands are all used on its own portfolio.

It has a presence across three major cotton-growing regions – Namoi, Macquarie and Murrumbidgee – and owns five advanced gins capable of processing more than 1 million bales per year. In addition, it owns two warehousing operations and a classing laboratory, alongside an established domestic and international marketing business.

Sources speculated that the operating business could be sold separately from the underlying farmland and water assets if that were likely to generate a higher return for Auscott’s owners.

One market source with experience of investing in cotton assets told Agri Investor: “Institutional, corporate and offshore investment has been a consistent theme in the Australian cotton sector and is well accepted. We have previously seen successful recycling of large-scale irrigated cotton portfolios across these types of participants as well as the larger, well established family operations.

“The Australian cotton sector remains an attractive investment area. It offers high productivity levels, a quality product, well established infrastructure, a sound price risk management framework, ongoing and significant improvements in water use efficiency and environmental aspects, and strong long-term profitability and returns per unit of water utilized.”

In a statement, Auscott managing director and CEO Ashley Power said: “Following the successful sale of the Auscott Midkin Aggregation at Moree last year, the interest in Auscott has continued and after much consideration, the parent JG Boswell Company has decided to seek formal expressions of interest for the entire Auscott entity.

“We respect our place within the community and value our relationship with our grower customers. In addition, it is our people that sets Auscott apart. We have the right skills and experience at every point in the value chain with a dedication and passion for excellence that makes Auscott so valuable. We are now looking for an investor that shares these values and to continue the growth of the company.”