Fast-growing livestock finance specialist, StockCo, will keep offering services via a broad range independent selling agents and the Ruralco network despite 30 per cent of its business being sold to Elders.
Elders expects to stitch up a deal to acquire almost a third of the Australian arm of the trans-Tasman company next month.
The 11-year-old StockCo helps sheep and cattle buyers fund purchases at saleyards or direct from vendors, with its main focus being on short-term lending against the value of the livestock being traded.
Invariably these three- to 12-month loans enable buyers to finish or background store quality beef cattle and lambs before resale into prime markets or direct to feedlots and meat processors.
Established in New Zealand by former livestock agent and stockbroker, Marcus Kight, the company has since funded more than $1.1 billion in lamb and cattle transactions across the Tasman and more than $250 million in cattle purchases in Australia after ramping up its presence here in 2014.
It is now the largest specialist livestock financier in Australia and NZ, with a local customer base of about 420 regular customers growing by about 20 each month.
Many of those customers are in the feedlot sector as well as beef and lamb backgrounders or traders and dairy farmers.
StockCo also provides tailored on-demand structured finance packages valued from $1 million for corporate and large family farming businesses with irregular cashflow.
StockCo Australia chief executive officer, Richard Brimblecombe, said the Elders network had a lot of natural synergies with the young financier and the two shared a “long-term alignment and commitment to the livestock sector”.
However, independent livestock agents and the Ruralco network would still remain valued outlets for StockCo finance after Elders bought in.
“In fact, most of our business is actually with the customers of independent agents,” he said.
“We’re very comfortable with the healthy distribution relationships we’ve established, including arrangements with independent agribusinesses and the SproutAg farm finance advisory and broking service.”
StockCo’s founder and managing director Mr Kight confirmed the sale of an equity stake to Elders would not change its multi-channel approach.
“From our perspective it’s business as usual,” he said.
Elders Managing director, Mark Allison, said StockCo’s specialist funding products were well received by his company’s customers as a convenient and simple way to cover livestock acquisitions.
“This equity proposition will strengthen our relationship with StockCo and align the growth ambitions of both companies,” he said.
Further developing Elders’ financial services business was also in line with his company’s eight point business recovery plan.
StockCo’s lending model has been available in Australia since 2006, but gained traction after the introduction of the Personal Property Security Register (PPSR) which gave the company the confidence to push the relatively novel approach of lending money against the full value of livestock and then closely monitoring and controlling the arrangement.
“Banks do an excellent job of providing the agriculture sector’s primary finance needs, but their lending criteria is based on the value of farm real estate,” Mr Brimblecombe said.
“Our service is about enhancing the producer’s existing capacity with funds which complement their banking relationships.”
That complementary funding and the security offered by the herd or flock being traded had been widely appreciated by producers as livestock values shot up in recent years.
The National Livestock Identification System (NLIS) database is monitored daily to ensure stock over which the lender may have a potential future claim are continually accounted for during the loan period.
StockCo’s short-term lending rates are at a premium to mainstream finance costs, but loan terms are mostly for less than six months and extend no longer than a year.
Mr Brimblecombe said borrowing costs on a typical $1000 steer for six months worked out about 40 cents a day, including finance charges and a 1.5 per cent administration fee.
Current rates ranged from 7.65pc for three months to 10.65pc for 10 months.
Mr Kight said the Elders deal would not change the facilities offered by StockCo or the company strategy “to make our facilities available to all Australian livestock producers regardless of the agent they use, or the target market for their livestock”.
He said StockCo would continue to be managed by a separate board, and its own management team and would continue operating as an independent business.
The company’s farm sector focus is also to continue to be with the livestock sector only, possibly expanding in future to cover more species and potentially livestock products such as wool.