The purpose of this report is to provide an overview of Australian Agricultural Company Limited (AAC)’s business position, prospects for development and a recommendation of acquisition for potential investors.
The report is prepared based on the economic and industry data as well as financial and non-financial information on the operation of AAC. Financial ratio is calculated based on the data from Fin Analysis and is conducted to make comparisons between AAC’s performance and peer companies.
Economic and Industry data is collected from Australian Bureau of Statistics and IBISWorld. Financial and non-financial company information is obtained from AAC’s Annual Report and through official websites, ASX, Yahoo Finance and Fin Analysis.
Analysis and Conclusions
Analysis is conducted by collating key information in tables and charts, and using the AFF5130 seminar notes to guide focus areas. Judgements and conclusions have been made based on data and theories.
Assumptions and Limitations
Due to the lack of listed firms with exactly the same business as AAC, this report will compare the performance of AAC with other companies in agricultural sector which have similar activities. Differences in calculated ratios could therefore be partially attributable to the effects of operation of these firms. Additional, some collected data was restricted to publicly available information, resulting in a certain level of limitation in our analysis.
Australian Agricultural Company Limited (AAC), established in 1824, is the oldest continuously operating company in Australia and a world-leading provider of beef and agricultural products. With more than 600,000 head of cattle, the company operates 19 cattle stations, two feedlots and three farms across more than 7.2 million hectares of land across Queensland and the Northern Territory, equating to approximately 1.1 per cent of Australia's land mass.
AAC has listed on Australian Stock Exchange (ASX) since 10 August, 2001 and has an estimated worth of $415 million on the basis of market capitalization (Fin Analysis, 2012).
AAC is focusing its trading activities on domestic and Asia market.
Figure 1: AAC’s business segment
1. Acquisition analysis
1.1. Right potential acquirer company
Thanks to the new policy to renovate the producing process and enhance the productivity, AAC has a great potentiality to develop significantly in the near future. Therefore, there are many companies (both from the same and different industrial sector) could be categorized as potential acquirers, such as: Goodman Fielder Ltd., GrainCorp Ltd., Pacific Equity Partner,… Among them, GrainCorp Limited (GNC) is considered to be the most potential acquirer due to a highly strategy experience, providing access to capital, international network, and experience in food and manufacturing industries.
1.2. Synergy benefits:
GrainCorp Limited (GNC), founded in 1916, provides handling, storage, marketing and logistics services to the grain growing industry. GNC has an estimated worth of $1,872 million (Fin Analysis, 2012).
Economies of scale: vertical integration of food supply chain processes and resources
Combine complementary resources: combine resources in the terms of marketing, operations, suppliers, transportation, infrastructure, human resources, technology and other processes and systems to achieve the optimal productivity.
Improvement of AAC management: GNC is one of the biggest food companies in Australia with extensive experiences in managing and supplying agricultural products.
Reduce risks: by diversifying the goods supplied, the acquirer can reduce the risk.
Enhance operating activities: GrainCorp Ltd. has advantages in Europe and US market while AAC are focusing on Asian market (i.e. China, Thailand,…), the acquisition can broaden the market share of both two companies.
Since the merger and acquisition successful, AAC and GNC have…