PrimeAg Australia 2007-13: A Suitable Structure for Long Term Investment in Agriculture?
Plunkett, B., 2015. PrimeAg Australia 2007-13: A Suitable Structure for Long Term Investment in Agriculture?. Australasian Agribusiness Review, 23.
26 Pages Posted: 11 Feb 2019
Date Written: January 30, 2015
Prime Agriculture Australia Limited (or PrimeAg), 2007–2013, was a listed investor in, and operator of, agricultural properties spread between the Australian States of Queensland (Qld) and New South Wales (NSW). The company was incorporated under Australian Federal Corporations Law in August 2007 as an unlisted public company and subsequently listed on the Australian Stock Exchange (ASX) in December 2007 with the security symbol PAG. The initial public offering (IPO) raised $300M from the sale of 150M shares of $2 for the purpose of purchasing land and water entitlements to ‘take advantage of the increasing Global Demand for soft commodities’ (PAG, 2007a). PAG envisaged realising this advantage by identifying land suitable to more productively grow a range of substitutable crops. Its aim was to achieve this by employing advanced management and technology, attaining scale economies from within co-located farms (hubs), and from across the whole group, and from the application of some selected capital development, such as irrigation works (see Table 11). These practices would yield superior operating profits and, in time, realisable capital gains which could be used to fund new rounds of land purchases and further development. Eves and Painter (2008) demonstrate that returns superior and uncorrelated to equities markets, with less risk, are possible from agriculture over a 15 year period. PAG operated as a listed entity for six years.
After incorporation and listing costs, the new company had approximately $285M to invest. By the end of 2007 it had settled the purchase of several properties and was in the process of exercising options to purchase over several more. By the end of financial year 2008, it had $54M cash remaining. At its maximum in 2011, PAG had ownership of over 11,500 ha of irrigated land, 18,000 ha of dryland property and 68 gigalitres (GL) of water entitlements. Yet by November 2013, PAG was delisted, with its assets sold and its capital returned to shareholders. The company’s shares only briefly traded above Net Asset Value (NAV), which has been a frequent occurrence with listed Australian agricultural stocks.
This paper explores whether this listed entity was a sufficiently suitable fit for investment into the highly volatile agricultural sector by outlining the key major developments in PAG’s six-year history. The rest of the paper is organised into four sections around background on the rural land market in Australia, the key documents of the 2007 Prospectus, the 2011 Rights Issue and the 2013 Scheme of Arrangement.
Keywords: PAG, ASX Listed, Agriculture Investment, Future Fund
JEL Classification: G32, Q14, N87, L25
Suggested Citation: Suggested Citation