INSTITUTIONAL investors have signalled their faith in future prospects for debt-heavy beef giant Australian Agricultural Company (AACo), over-subscribing the first stage of its public share offer this week.
A $219.2 million accelerated capital raising initiative by AACo has generated about $129.2m from large scale investors already holding shares in the northern Australian cattle operation and new institutional investors from Australia and overseas.
The capital raising, worth about $300m in total, will be used to reduce AACo's debt load and help pay for its $91m northern abattoir project.
It consists of the $219.2m entitlement offer and $80m in convertible notes and follows a much smaller capital raising just two years ago.
Existing institutional shareholders took up only 56 per cent of their entitlement in Australia's biggest cattle producer but hopeful newcomers had to have their acceptances rationed to account for the remaining available shares.
The majority of new institutional investors now on the books are locally-based private groups selected for their medium-to-long-term investing habits, said AACo's acting chief executive officer Craig White.
AACo hoped the confidence shown by the response to the two-day institutional offer would be duplicated from tomorrow when retail shareholders have the chance to accept an extra seven shares for every 10 currently they hold, at a discount price of $1 each.
The retail offer remains open until October 8.
The capital raising has given Bahamas-based AA Trust the chance to increase its stake in AACo to almost 20pc after making a pre-commitment offer supporting the company's efforts to strengthen its balance sheet, cut debt and push ahead with the abattoir just south of Darwin.
AA Trust, owned by billionaire Joe Lewis, previously had 13.5pc.
Mr White said it was "really encouraging" that big scale investors had paid attention to the "global macro picture playing out for beef demand in the future".
"The capital raising will provide financial flexibility to execute AACo's strategy on an accelerated basis," he said.
"We are pleased by the strong support shown by existing shareholders as well as the significant interest in AACo from new investors."
Investors from outside Australia had in recent times tended to see the food demand story a little more clearly than "yield-driven domestic investors" whose expectations had often struggled with local agribusiness stocks.
However, Mr White hoped retail investors would note how the big investment companies had judged AACo's long-term production and market strategy, including the company's move up the value chain with its commitment to meat processing.
Agribusiness analyst with share broking firm RBS Morgans, Belinda Moore, said although Australian cattle market prices were depressed and seasonal conditions remained tough in areas where AACo operated, longer term market signals were encouraging.
"US cattle prices are sky-rocketing and there's an expectation that a shortage of protein will create a good long-term demand for beef," Ms Moore said.
But she noted in the wake of David Farley's recent resignation investors would also want to see AACo appoint an "impressive CEO" to guide the company towards much better earnings.
AACo has a history of poor returns and has been a generally poor trading performer since it listed on the Australian Securities Exchange 12 years ago.
Meanwhile, pressure to cut costs has prompted the company to move its Brisbane headquarters to Fortitude Valley, consolidating its two current locations into one.
An AACo spokesperson confirmed the new office move which is due to take place later this month.
