8-K: Agriculture & Natural Solutions Acquisition Corp. Announces $510 Million Merger with Australian Food & Agriculture Company

Agriculture & Natural Solutions Acquisition Corporation will merge with Australian Food & Agriculture Company, creating a publicly listed entity on the NYSE.

Summary

• Agriculture & Natural Solutions Acquisition Corporation (ANSC) has agreed to a business combination with Australian Food & Agriculture Company (AFA), valuing AFA at approximately $510 million.
• The combined company, Agriculture & Natural Solutions Company Limited (NewCo), is expected to be listed on the New York Stock Exchange (NYSE) under the ticker symbol AFAE.
• AFA is a large-scale, diversified agricultural business in New South Wales, Australia, with approximately 550,000 acres of land and 45,000 acre-feet of water entitlements.
• AFA's operations include sheep and wool production, cattle operations, irrigated and dryland cropping, and a 12,000 head feedlot.
• The transaction is expected to be funded by a combination of cash from ANSC's trust account, a potential private placement, and rollover equity from existing AFA shareholders.
• The transaction is subject to approval by ANSC's shareholders, regulatory approvals, and other customary closing conditions.
• The post-closing board of NewCo will consist of seven directors, including two designated by current AFA shareholders, two by ANSC, and three independent directors.

Sentiment

Score: 7

Explanation: The document presents a positive outlook for the combined company, highlighting AFA's strong assets, growth potential, and the favorable market conditions. However, it also acknowledges the risks and uncertainties associated with the transaction and the agricultural sector, which tempers the overall sentiment.

Positives

• AFA has a geographically diverse and integrated portfolio of land aggregations.
• AFA has a large portfolio of water entitlements, providing flexibility and water security.
• AFA's scale and revenue diversification helps mitigate climate and market risks.
• AFA's premium genetics underpin the bloodlines of a large portion of Australia's Merino sheep flock.
• AFA has a ten-year average return profile of 16% annually through EBITDA yield and asset value growth.
• AFA has numerous growth opportunities, including scaling into a larger agribusiness, creating premium brands, and developing carbon sequestration assets.
• AFA has an efficient and diverse operations, scale and systems provide natural mitigants from traditional agricultural risks.
• AFA has a long tenured ~70 person management and support staff team that will continue to operate AFA.

Negatives

• The transaction is subject to approval by ANSC's shareholders, regulatory approvals, and other customary closing conditions.
• The transaction is subject to a minimum cash condition, which may not be met if redemptions by ANSC's public shareholders are greater than expected.
• The transaction is subject to a potential private placement, which may not be completed or may not raise sufficient capital.
• The transaction is subject to a consent from AFAs principal banking facility, and the failure to obtain such consent could result in an event of default.
• The transaction is subject to a written notice of approval from the Foreign Investment Review Board in Australia, or the Treasurer of the Commonwealth of Australia shall have become precluded from making an order relating to the Business Combination.

Risks

• The ability of the parties to complete the Business Combination by ANSCs business combination deadline and the potential failure to obtain an extension of the business combination deadline if sought by ANSC.
• The occurrence of any event, change or other circumstance that could give rise to the termination of the definitive agreements relating to the Business Combination.
• The outcome of any legal, regulatory or governmental proceedings that may be instituted against NewCo, ANSC or AFA or any investigation or inquiry following announcement of the Business Combination, including in connection with the Business Combination.
• The inability to complete the Business Combination due to the failure to obtain approval of ANSCs shareholders or a failure to obtain FIRB Approval.
• AFAs and NewCos success in retaining or recruiting, or changes required in, their officers, key employees or directors following the Business Combination.
• The ability of the parties to obtain the listing of the NewCo Ordinary Shares and NewCo Warrants on the NYSE or another national securities exchange upon the Closing.
• The risk that the Business Combination disrupts current plans and operations of AFA as a result of the announcement and consummation of the transactions described herein.
• The ability to recognize the anticipated benefits of the Business Combination.
• Unexpected costs related to the Business Combination, which may be affected by, among other things, competition and the ability of AFA to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its key employees.
• The ability of the parties to consummate the Private Placements on the stated timeline.
• The use of proceeds from the Private Placements by the combined company.
• The risk that there will be insufficient cash raised through the Private Placements, or that the amount of redemptions by ANSCs public shareholders is greater than expected.
• The management and board composition of NewCo following completion of the Business Combination.
• Limited liquidity and trading of NewCos securities.
• Geopolitical risk and changes in applicable laws or regulations, including legal or regulatory developments (including, without limitation, accounting considerations) which could result in the need for AFA to restate its historical financial statements and cause unforeseen delays in the timing of the Business Combination and negatively impact the trading price of NewCos securities and the attractiveness of the Business Combination to investors.
• The possibility that AFA may be adversely affected by other economic, business, and/or competitive factors.
• Operational risks.
• The possibility that a pandemic or major disease disrupts AFAs business.
• Litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on AFAs resources.
• The risks that the consummation of the Business Combination is substantially delayed or does not occur, including the risk that the transaction may not be completed by ANSCs business combination deadline and the potential failure to obtain extensions of the business combination deadline if sought by ANSC.

Future Outlook

The combined company, NewCo, is expected to be listed on the NYSE or such other stock exchange agreed to by the parties and trade under the ticker symbol AFAE. NewCo intends to create an attractive agricultural decarbonization and premium product company through the Business Combination and any subsequent acquisitions.

Management Comments

• Bert Glover, Chief Executive Officer of ANSC, said: We have always believed that agriculturebacked by the right sort of capitalcould deliver nature and climate solutions. ANSC is proud to enter into a business combination with AFA and looks to establish it as a leader in this regenerative transition not just in Australia, but across the world.
• David Leuschen, Chairman of the board of directors of ANSC, added: We are thrilled to have this opportunity for ANSC to combine with AFA. We view Australia as a leader in the application of new techniques to meaningfully decarbonize agriculture, and we believe that AFA represents a once in a generation chance to combine with a major Australian agricultural company, operating three marquee aggregations including some of Australias most iconic properties.

Industry Context

This announcement comes at a time when there is increasing investor interest in sustainable agriculture and decarbonization. The transaction aims to create a platform for growth in this sector, leveraging AFA's existing assets and expertise.

Comparison to Industry Standards

• AFA's return profile has averaged 16% annually through EBITDA yield and asset value growth over the past ten years, which is a strong performance compared to other agricultural companies.
• The document notes that Australian farmland has outperformed Australian and U.S. equities over the last five, ten and twenty-year periods, indicating a strong market for agricultural assets.
• The document also notes that Australian farmland is undervalued compared to North America and Western Europe, suggesting a potential for further appreciation.
• The document compares AFA to AACo, noting that AFA has a more diversified business mix, a higher EBITDA margin, and a lower price to asset value ratio.

Stakeholder Impact

• Shareholders of ANSC will have the opportunity to participate in a new publicly listed company focused on sustainable agriculture.
• AFA's management and support staff are expected to continue operating the business.
• AFA's customers and suppliers may experience changes as a result of the transaction.
• Employees of AFA will be subject to new management and policies.

Next Steps

• ANSC shareholders will vote on the proposed Business Combination.
• The parties will seek regulatory approvals, including FIRB Approval.
• NewCo will seek to list its shares on the NYSE or another agreed upon exchange.
• NewCo will evaluate raising incremental capital via an equity or equity-linked PIPE financing.

Key Dates

Keywords

agriculture, Australian Food & Agriculture Company, AFA, merger, business combination, NYSE, livestock, cropping, water entitlements, carbon sequestration, renewable energy, decarbonization, Australia, New South Wales, Merino sheep, feedlot