CORRECTED-PrimeAg shares drop after deal to sell some assets to U.S. fund

Sun Feb 17, 2013 5:46pm EST

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(Corrects paragraph 12 to show investment commitments are valued in U.S dollars, not Australian dollars)

By Colin Packham

SYDNEY Feb 15 (Reuters) - Shares in PrimeAg Australia Ltd fell a much as 3 percent on Friday after the company said it will sell 60 percent of its assets for US$123-126 million after traders were left disappointed that the deal was not a complete takeover, analysts said.

PrimeAg said TIAA-CREF Global Agriculture has agreed to acquire some of PrimeAg's cropping and livestock properties in New South Wales at a premium to its book value, but at a "slight discount to independent valuations."

TIAA-CREF Global Agriculture will buy Crooble aggregation, the Macintyre Downs, Mullala and Milchengowrie properties, and has the option to buy either Lower Box and Warra.

"The market assumed it wouldn't be able to get book value for these assets so it was a good result," said Jordan Rogers, an equity analyst at Commonwealth Bank of Australia.

Despite analysts' approval, shares fell as much 2.9 percent before regaining some ground to a slide of 1.65 percent by 0419 GMT.

Analysts said the market reaction was likely driven by disappointment that the deal was not a complete takeover and the sale of PrimeAg's remaining assets could drag on for a year.

Calls to PrimeAg's largest shareholders were not returned.

PrimeAg has embarked on a series of asset sales as it seeks to delist from the Australian Stock Exchange this year after it said the market has failed to marry its value with its share price.

TIAA-CREF has already acquired some of PrimeAg's farm assets. In May, the fund agreed to a deal worth A$36.7 million ($38.01 million) to buy six farming properties across Queensland and New South Wales at a discounted rate.

PrimeAg said in a filing to the stock exchange that it is in talks to sell its remaining assets, both properties and non-property holdings.

Traders said PrimeAg's remaining assets may draw attention from foreign investors, but would likely be more appealing to local investors due to their smaller size.

TIAA-CREF Global Agriculture has several international institutional investors and has $2 billion of commitments to invest in farmland in the United States, Australia and Brazil, according to the company's web site.

Appetite for Australian agriculture assets by foreign firms has captured national prominence following the sales of several notable assets amid concerns Australia food security is being compromised.

($1 = 0.9655 Australian dollars)

(Reporting by Colin Packham; Editing by Matt Driskill)

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