ADM Capital pours $9.4m into Kazakh dairy

The Hong Kong-based firm, which bills itself as the most active PE investor in the Central Asian nation, will acquire a controlling stake in Aina Dairy Farm.

Hong Kong-based ADM Capital is backing the Kazakh dairy sector by investing $9.4 million in Aina Dairy Farm LLP in the Akmola region through CCL Kazakhstan Silk Road Agriculture Growth Fund, a vehicle sponsored by agricultural lender KazAgro Management Holding and the Hungarian Export-Import Bank.

As a result of this transaction, the fund, which is managed by ADM’s Eastern European arm CCL Capital, will own a 58.9 percent stake in the newly-established entity. An additional $1 million will be invested by a local partner, Alexey Ten, ADM Capital’s investment director in Kazakhstan, told Agri Investor.

The $10.4 million investment will go towards modernizing the existing facility and increasing the current number of livestock by purchasing new dairy cows from leading suppliers in Hungary, as well as building a new facility with a capacity of 1,500 cows. Once the new facility becomes operational in 2019, total capacity will reach 3,000 heads of cattle expected to produce 24.6 million liters of milk annually.

“Currently, the local dairy processing companies are heavily under-supplied by the natural milk, and they are forced to import the dry powder milk to maintain the production,” said CCL Capital partner Orinbasar Kuatov. In this project we see the huge opportunity for growth through improvement of the quality of natural milk, increasing production volumes,” he said, adding that CCL Capital and its local partner, Kazakh entrepreneur Kazbek Yeskendirov, will apply global standards throughout the project’s supply chain.

Aina Dairy Farm is the fund’s second investment. The first investment, in the amount of $10 million, was made last year in partnership with Holland Food Ventures and Green Capital Kazakhstan. “The aim of [that] project is the construction of a 20-hectare greenhouse in the outskirts of Aktobe city within the next three years,” Ten said. Once completed, the greenhouse complex will yield up to 80 kg of cucumbers and 70 kg of tomatoes per square meter annually.

To date, the CCL Kazakhstan Silk Road Agriculture Growth Fund is 50 percent deployed. Launched in 2015, the fund’s first close was held in April of the following year on $40 million with KazAgro and the Hungarian Export-Import Bank, each committing $20 million.

At the time, ADM had stated that it was expecting to hold a second and final close of between $80 million and $120 million and expanding the fund’s geographic focus to Central Asia and the Caucasus region by the end of 2016. Asked whether this strategy remained intact, Ten responded: “It is planned that CCL Kazakhstan Silk Road Agriculture Growth Fund will increase its capital commitment and is currently in the process of fundraising.”

The target remains the same, ranging between $80 million and $120 million, but he declined to comment when the fund was expected to hold a final close.

The vehicle targets investments – equity, quasi equity and convertible debt – across the agricultural supply chain including primary inputs, production, processing, logistics and distribution. Targeted companies are those that conduct their primary business activities primarily in Kazakhstan.

According to ADM, the firm is the most active private equity investor in the country having invested $220 million between 2010 and 2016 through other Kazakhstan-focused vehicles, such as the $100 million ADM Kazakhstan Capital Restructuring Fund and the $80.8 million Kazakhstan Growth Fund, each sponsored by EBRD and Kazyna Capital Management.

In addition to Kazakhstan, the firm invests in other emerging markets across 20 countries. Its total assets under management currently stand at $1.3 billion.

The firm also runs the Cibus fund, its first vehicle solely dedicated to agribusiness. The fund, which is currently being raised with a $500 million target, sealed its third deal last week when it bought an almond orchard in Australia.