Beston Global Food Company Limited (ASX: BFC) is currently seeking to list on the ASX on August 24, 2015 and is currently offering shares at 35 cents per share to the public.
But if you thought you were investing in a large food company, similar to the likes of Murray Goulburn Dairy Cooperative – known as the MG unit Trust (ASX: MGC), Freedom Foods Group Ltd (ASX: FNP), A2 Milk FPO NZ(ASX: A2M) or the Australian Agricultural Company Ltd(ASX: AAC), you’d be wrong.
Despite the name, Beston Global Food or BGFC, is essentially a collection of minor investments in a seafood harvester, processor and distributor, 100% ownership of a dairy farm and another minor interest in a small dairy producer.
Beston will indirectly own 26.5% of Paris Creek, which the company says is one of Australia’s premier producers of organic dairy products, including milk, cheese and yoghurt; 36% indirect interest in Ferguson Australia – which harvests, processes, packages and distributes live and packaged seafood (primarily Southern Rock Lobster) both domestically and into Asia. The farm is the Wellington Dairy Farm, located in Wellington, South Australia, and will be used to increase the supply of raw milk to Paris Creek.
Those are the starting assets, with BGFC planning to acquire further businesses and assets manufacturing and marketing food and beverage commodities. But, none of these businesses have operated together ever in the past, and apart from the Wellington Dairy Farm, BGFC has virtually no control of the direction over both Ferguson and Paris Creek.
Beston has also entered into a contract to acquire the Jervois and Murray Bridge assets of United Dairy Power Group (UDP) from receivers for $4.5 million. All up, acquisitions mentioned above will total $12.3 million, but Beston is looking to raise between $100 million and $130 million. Investors will have to trust Beston to make wise investment choices with their cash despite no previous ASX track record.
What makes this investment worse is that BGFC has handed over control to an external asset manager, Beston Pacific Asset Management (BPAM), to which Beston must pay a management fee of 1.2%, calculated biannually and paid monthly. A performance fee is also payable.
But then, given BGFC’s management’s experience, it appears reasonable to hand over management of the assets to someone else. The problem is that neither Beston Global Food nor BPAM appears to have much management experience of dairy and seafood businesses.
CEO Sean Ebert has a background in engineering and most recently worked for WorleyParsons Limited (ASX: WOR), an oil and gas services company and prior to that Logicamms Limited (ASX: LCM) an engineering company. Apart from independent non-executive director Don Taylor, who serves as chairman of Graincorp Ltd (ASX: GNC), there’s virtually no one else with proven senior level management of food and beverage businesses.
Foolish takeaway
With a bunch of virtually unrelated assets thrown together, no verifiable track record of running the acquired assets, inexperienced management and what I’ll call an ‘unusual’ business structure, Foolish investors would be wise to steer well clear of Beston Global Food for now. Let the company prove itself, management, its business model and strategy first.
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