LARGE-scale grain producer AACL Holdings is aiming to go public, after last week lodging a prospectus with the Stock Exchange to attempt to raise $11 million.
AACL was established in Western Australia in 1997 and works in partnership with individual farm units to produce grain through its Grain Co-Production (GCP) product.
The company loans capital to farmers for planting, who in then share a certain percentage up to a certain production level with the company.
If there is no production, then the farmer is not liable to pay back costs, although rates for capital are slightly higher than conventional lenders if there is a crop, off-setting AACL’s risk.
The GCP product has gone nation-wide and has attracted a loyal following from across the country, with total AACL-funded tonnages rising to 467,000 tonnes for the last harvest.
Many farmers have said it has been a good means of hedging against production risk, in the absence of a multi-peril insurance product.
AACL managing director Andrew McBain has said that while the product was a great hedge product for farmers, the business does its own risk management by only taking on farmers it thinks will perform well.
“We’re not a lender of last resort, and growers have to pass our tests before we get them on our books,” Mr McBain said in an earlier interview with Rural Press.
“It’s not necessarily about their balance sheets, as a lot of our growers tend to be younger and just starting out, but it is their capacity to grow a crop and how well they can manage crop production.”
The GCP product is used to grow three crops: wheat, barley and canola.
Mr McBain was at pains to point out AACL is not a so-called ‘corporate farmer’.
He said the company’s model is for farmers provide land, equipment and expertise with AACL providing the capital to grow the crops.
AACL is also involved in other areas of agriculture, such as grain marketing and carbon sequestration.
The AACL prospectus offers up to 44,000,000 shares at 25 cents each and if subscribed in full the company will have a total of 72,000,000 shares on issue and a market capitalisation of $18 million.
The offer opened on 29 January and is expected to close on 16 February, with the ASX listing due in late February.
Broadacre Asset Management, AACL’s parent company, is converting $4 million of existing debt to equity at the IPO price.
This will make AACL debt-free when it lists on the ASX later this month. Funds raised from the IPO will also be used for working capital and funding the continued rapid growth of the GCP.
Mr McBain said the share offer fundraising gives investors an opportunity to get on board a fast growing and unique business model.
“We have rapidly expanded GCP from 20,000t of wheat in 2005 to a point where we have contracted 467,000t of various grains in 2009,” Mr McBain said.
“In 2010 we are expecting to contract production of 610,000t of grain. This makes AACL the largest grain production enterprise in Australia.
“AACL’s GCP has no direct competition and currently has market penetration of less than two per cent of Australia’s average annual wheat, barley and canola production of 30mt.”
AACL’s aim is to produce and manage 2-3mt or 10 per cent of the Australian crop by 2014.
The Western Australian based company has an experienced management team with over 40 staff and 235 farmers across Australia.
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