Macquarie tests market for Paraway Pastoral Company in potential multibillion‑dollar agri exit

This article was reproduced under licence from Agri Investor.

After nearly two decades of consolidation, Macquarie is preparing to take its flagship pastoral platform to market, betting that scale, operational integration and a seasoned management team will resonate with institutional investors seeking exposure to Australian agriculture.

When children reach the age of 18, many parents decide they are mature enough to leave home.

So it is with Macquarie Asset Management's Paraway Pastoral Company, a 4.4 million ha cattle, sheep and cropping business 18 years in the making, which MAM is now preparing for the world’s investors.

A source briefed on the matter said in July that Paraway’s assets were believed to have a value of more than A$2.5 billion ($1.7 billion; €1.4 billion).

Another source has since said that the A$2.5 billion figure is likely at the lower end of the desired range.

Speaking exclusively with Agri Investor at Macquarie’s head office in Sydney, MAM head of agriculture Colin Rigg did not confirm a figure, saying instead: “We need to optimize the value of the business.”

Paraway Pastoral Company was among the first of MAM’s agricultural investment strategies and was the main component of its Macquarie Pastoral Fund, commencing almost 20 years ago in 2007.

It now sits alongside five others: farmland investment company Cowal Agriculture, cotton platform Cubbie Ag, produce supplier Fresh Produce Group, broadacre row cropping farm operator Viridis Ag and a permanent crop portfolio.

Paraway will be MAM’s third divestment of a complete agricultural business after the sale of cropping portfolio Lawson Grains to funds managed by New Forests and Alberta Investment Management Corporation in 2022, and the sale of Brazilian corn‑ and soybean‑focused business Cruzeiro do Sul Grãos about a year later.

It took MAM around 15 years to accumulate the Paraway properties that now span the entire east coast of the country.

The portfolio boasts 28 stations across three states, with a carrying capacity of 250,000 cattle and 200,000 sheep.

“Each of those stations in their own right have been carefully selected as tier‑one operating assets,” Rigg says.

“They’ve also been put together strategically so that there’s some operational coordination and synergies that come from thinking about how we operate them as a collective rather than just 28 individual stations.”

With such a spread in Paraway’s operations, Rigg says implementing a high‑quality management team is crucial in driving “optimal returns.”

Back to basics

When it comes to strategy, Johnston’s philosophy is to keep things simple and let his team get on with the job.

The strategy boils down to four key pillars:

• performance
• safety
• people and culture
• sustainability

“It doesn’t matter if you run sheep, cattle or do cropping, the fundamentals are the same around good decision‑making.”

The needs of MAM’s investors drive much of the strategy, and sustainability is one of their main requirements.

Johnston says so far, Paraway has been strong on measuring, building up an understanding of its carbon footprint and intensity.

It has also established carbon projects on‑farm, although it has chosen not to register them under the Australian Carbon Credit Unit Scheme yet.

“We’re learning, and it’s still quite early days.

“It’s an area we are actively watching and preparing for when we feel the time is right from a market and business perspective.”

Institutional appetite

Rigg expects potential investors to see value in both the time taken to build Paraway’s assets, and the way Macquarie has built up the management team and processes to support them under a “single strategic vision.”

He says although Paraway could continue to grow under MAM, he believes it has reached a stage of maturity that will translate into a strong reception from the market.

“We have seen, over a period of time now, increasing interest in agriculture from institutional capital.

“From that perspective, there aren’t many opportunities like Paraway or like Lawson Grains; we’ve had a good experience in terms of tapping into that thematic previously.

“Off the back of that, it made sense to bring [Paraway] in and test the market at this point.”

Interest so far has come from both domestic and international investors, Rigg says, with Paraway’s size a drawcard for investors for whom smaller assets would not suit.

“For any investor or a superannuation fund who’s looking to get set in agriculture, often the question is, ‘How do I do it at scale and de‑risk a potential J‑curve return profile?’

“We don’t have to talk about an individual farm here of A$50 or A$100 million; we can talk about a business that’s more in the billions, with an experienced management team and demonstrable track record.”

In response to a question about potential interest from Canadian pension funds – some of whom, like La Caisse and PSP Investments, are already highly active in Australia – Rigg does not commit to one type of investor being more likely than another to acquire Paraway.

However, he points to the amount of capital the Canadians have deployed in Australia as a positive for the sector overall.

“That goes to demonstrate the appeal for investors who have established an appetite and an investment strategy into agriculture; there has been relative success there because there has been follow‑on capital and an expansion of those portfolios from the likes of some of those investors.

“That’s very encouraging.”