Websters branches out from walnuts

Shares in both Webster and Tandou rallied sharply when the island state company announced late last month it wanted to significantly expand its mainland ventures into more broadacre cropping in NSW and Queensland, but they have dipped in the past two weeks as investors await more detail.

Webster is also buying former PrimeAg operation, Bengerang, which includes a 8177 hectare five-property aggregation at Garah, north-west of Moree; 1684ha near Condamine on Queensland's Darling Downs, and the Buster family's former 15,000ha Darling Farms aggregation at Bourke.

Bengerang also has an option to spend $8m on a property it currently leases, "Medgun" at Garah, in August, which Webster intends to buy as planned.

NSW cotton grower and recently appointed Webster group director David Robinson's Australian Food and Fibre at Moree has a key ownership stake in Bengerang, as does high profile ports and logistics businessman Chris Corrigan, also a Webster director.

Webster's $200 million takeover of both Tandou and Bengerang will more than double the Webster group's current capitalised asset value.

It will also give Australia's largest walnut grower about 11,000ha of extra irrigated farming country making it the Australia's third biggest cotton producer, planting up to 11 per cent of the industry's potential crop area.

Tandou established its lakebed farming operations near Menindee in the 1980s, becoming a notable water market trader in the past decade and more recently an irrigated cropper at Hay.

It also operates 122,000ha of Western Division rangeland grazing operations producing organic lamb for domestic and US markets.

If the deal - which Tandou directors support - goes to plan, Webster will be responsible for Australia's largest water entitlement portfolio of more than 235,000 megalitres, estimated to be worth up to $300m.

Webster is also in the throes of scaling back its Tasmanian horticulture activities, selling its Field Fresh Tasmania onion business at Devonport to Australia's largest carrot grower, West Australian-based Sumich, by June.

While continuing with its Walnut Australia operations in Tasmania, it plans to move senior management to the NSW Riverina as part of the NSW expansion move.

The shift into irrigated broadacre cropping began late last year when the 184-year-old Webster bought Darlington Point's AgReserves Australia.

That deal involved 40,000ha based on "Kooba" on the Murrumbidgee River, including Bringagee and Benerembah Station, and the Lachlan Valley's Booberoi Station at Eurabalong.

The company currently owns or manages 2200ha of walnut orchards in Tasmania and the Riverina around Griffith, plus a large nursery.

Nut yields are projected to reach 11,000 tonnes next year, cashing in on surging western world demand and emerging markets in Turkey, China and India.

Tandou managing director Guy Kingwill said no details were yet available on how Webster intended to manage the lakebed farming and western pastoral operation, currently run from Mildura in northern Victoria.

He regarded Tandou's business model was a "fairly unique operation" which had contributed a lot to the economy of the Lower Darling region in western NSW since it became a listed business almost 30 years ago.

"The Menindee operation has the ability to be very productive, but the business has been looking to grow in scale for a while," he said.

"Clearly we needed something north of $100m in capital value to attract the sort of investor interest required to fund that growth.

"We've looked at various options over the years, but this has been the most attractive and it is a very exciting transaction.

"It will create bigger operation with the geographic diversity and scale to reduce risk exposure for the whole business."

Tandou will release a target statement responding to Webster's bidder statement in the second week of April, while a Webster shareholder meeting to approve the Bengerang and Tandou transactions is due on May 4.

If the takeover is completed as planned, Tandou's existing shareholders will hold 25pc of the enlarged Webster business, Webster's shareholders 44.3pc, and shares issued as part of the Bengerang acquisition will have 30pc of the company register.

The Tandou bid involves swapping one current Webster share for every 2.25 Tandou shares, roughly giving Tandou stock a market value around 66 cents/share - well up on the 47.5c price prior to the takeover announcement, and still above recent trade peaks of 62c.

Tandou shares were this week trading around 58c each and Webster down from $1.56 to around $1.50/share.