Recently, JBS Australia Group and Rural Funds Group (managed by Rural Funds Management (RFM)) entered into a conditional agreement whereby RFM will become one of JBS’s main suppliers of grain fed cattle in Australia and the transaction is subject to normal terms and conditions, including Foreign Investment Review Board approval. JBS agreed to enter into a finance lease transaction of its five feedlots so that it can provide the adequate infrastructure and security for RFM’s cattle and which will be fed for an average of 120 days before being sold to one of JBS’s processing facilities for slaughtering.
In the meanwhile, JBS Australia will continue to operate and manage the feedlots for up to 10 years and has the option to terminate the agreement at any time after five years. This partnership will allow RFF to add a substantial and highly capable new counterpart to its portfolio that will contribute to the growth of fund assets and income. This was due to the agreement which RFM had entered into with JBS which involved the acquisition and subsequent execution of a 10 year finance lease for JBS’ five Australian feedlots, a 10 year limited guarantee that will enable JBS to replace an existing arrangement for the supply of cattle to the Feedlots and grain fed business and the purchase of a cattle property which was announced on 17 May 2018. The Group is planning to fund the acquisition via a fully underwritten $149.5m accelerated non-renounceable entitlement offer.
Further, the Group will issue approximately issue 76,689,155 fully paid units at a consideration of $1.95 per unit in pursuant to the terms of the accelerated pro-rata non-renounceable Entitlement Offer which Group has planned. It is expected that this transaction will be providing positive synergies and expects that FY19’s pay-out ratio will be maintained at 79 per cent and reaffirmed FY19’s distributions per unit of 10.43 cents. The stock was trading flat at $2.07 without any change in its price. (as on 12 July 2018; 04:00 PM AEST).
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