Canadians back takeover of $500m Auscott
Auscott made profits of $94.5 million in the 2020 financial year.

Canadians back takeover of $500m Auscott

In one of the biggest agricultural deals of the year, Canada’s Public Sector Pension Investment Board (PSP) has partnered with the Robinson family’s Australian Food & Fibre to acquire cotton producer Auscott.

While the price paid for Auscott was not disclosed, the business and its assets – including 22,000 hectares of developed irrigation land in Central NSW and 143,000 megalitres of water entitlements – were taken to market in July last year with price expectations in excess of $500 million.

The deal follows AFF acquiring Auscott’s Midkin Aggregation at Moree for around $300 million in 2019.

AFF, founded by cotton industry legend David Robinson, formed its joint venture with the Canadian sovereign wealth fund in 2017.

PSP, which manages the pension savings of Canadian public servants and the Royal Canadian Mounted Police, has acquired more than $2 billion of agricultural investments in Australia, including taking over ASX-listed nuts and water group Webster Limited in 2019.

Under the deal struck with long-time owner, US-based family enterprise JG Boswell Company, AFF will acquire 100 per cent of Auscott, including its properties, ginning, warehousing and marketing operations.

Auscott’s operations span across the three major cotton growing regions of Namoi, Macquarie and Murrumbidgee. Its five-gin network is capable of processing more than one million bales.

These assets will complement AFF’s cotton operations in northern NSW.

“AFF’s acquisition of Auscott represents a significant milestone, and is the latest in a series of strategic initiatives that the company has launched and delivered on since the inception of our joint venture,” said PSP Investments senior managing director and global head of natural resources MarcDrouin.

JG Boswell Company, which has owned Auscott since 1963, put the cotton grower and producer up for sale in July last year to refocus on its core activities back in the United States.

The family-run company appointed Greg Quinn from PwC to broker the deal.

“We are proud of our history of achievement and support of the development of the Australian cotton industry,” said James Boswell, chairman and CEO of JG Boswell Company.

Full-year Auscott accounts lodged with ASIC show the company made an after-tax profit of $94.6 million following a loss of $10 million in the prior year, though much of this turnaround was driven by the sale of its Midkin aggregation.

This sale generated a profit of $166.4 million and contributed two-thirds of Auscott’s $259 million of revenues in fiscal 2020 after cotton-related sales fell 62 per cent to $70 million.

In its results commentary, Auscott said minimal water availability resulted in its “lowest production output in over 10 years”.

Auscott’s post-farmgate businesses will be led by current CEO Ashley Power and managed by his Sydney-based team.

“Auscott’s six decades of operations in the sector reflects Australia’s leading position on the global stage in high-quality cotton and the importance of a long horizon for value creation,” said AFF managing director Joe Robinson.

According to Rabobank Research, tight supplies in the US and growing global demand should keep cotton prices elevated this year.

“2021/22 supplies will be the lowest in five years despite a 16.4 per cent year-on-year increase in production” said Rabobank.

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