Sale may solve cropper's plight

Haidee VandenbergheCountryman

AACL Pty Ltd, one of the country's biggest corporate croppers, is set to be bought by Glencore.

Glencore had already come to AACL's rescue two years ago, entering into a $150 million, three-year deal to fund the ailing corporate cropper.

But despite the backing of one of the agricultural sector's giants, AACL has still struggled and after announcing a forecast $2.1 million net profit for the 2012 financial year it instead returned a $7.2 million loss.

The company, which blamed the loss on changes to accounting policy and a cut in expected grain tonnage, has since embarked on job cuts, slashing up to 15 jobs in a bid to save $500,000 over the next quarter.

Earlier this year, AACL received applications amounting to less than $500,000 from its retail capital raising attempts in May and ultimately returned the money.

AACL director Nathan Omodei, who joined the board of the company in April, conceded it had performed poorly in several areas but the sale deal with Glencore would be a lifeline.

"AACL will be a much stronger business (when owned by Glencore)," he said. "I think the concept that AACL was founded on is still very sound - using outside funds to invest in agriculture and spreading the load from traditional finance facilities like banks.

"AACL probably grew too quickly and some of the basics, such as grain marketing, weren't done that well in the beginning.

"In the last couple of years AACL has worked hard on those things and for a large part has turned that around.

"Is it too little too late for the current AACL structure? Probably, because it needs more funding and for that to happen Glencore is taking control of the business."

Mr Omodei said slim margins in the cropping game had affected AACL.

"We all know how hard it's been for farmers to make profit in the last couple of years and AACL is no different," he said.

"I'm not sure an independent business like AACL needs to stand in the middle of grain marketing companies and growers, there's just not enough margin in cropping at the moment."

The sale agreement between the two companies is still subject to due diligence and shareholder approval but is likely to involve Glencore settling AACL's debts as well as a cash payment to the parent company, AACL Holdings.

The amount of money set to change hands has not yet been revealed but the deal is also likely to involve Glencore offering to buy out any remaining managed investment scheme investors.

Although Glencore and AACL might have executed a heads of agreement, the corporate cropper's structure into the future remains unclear.

"What it means is farmers who have contracted with AACL this year is that they can be confident that the business will continue to run, that their contracts are solid and that Glencore will fulfil all those obligations that AACL has already entered into," Mr Omodei said.

"What it means for AACL into the future is really up to Glencore, if and when the deal proceeds.

"I've got no doubt Glencore will do a good job for farmers who are contracted but in terms of what products they offer in the future, that's still to be determined."

Definitive agreements are due by July 27.

Mr Omodei said should the deal proceed it was likely to be finalised by September.

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