ADM Capital Europe has held a first close on the Cibus Fund, its first vehicle dedicated to agribusiness, sister publication Private Equity International has learned.
The firm has raised $100 million for the fund, which has a target and hard-cap of $500 million. It anticipates holding a further close at the end of this year.
ADM Capital, which was established in 1998 and began life making credit investments in Asia, currently has around $1.2 billion in assets under management in both open- and closed-ended funds and separately managed accounts.
The Cibus Fund will be led by ADM Capital co-founder Robert Appleby and Jason Silm, the former head of agribusiness investment at VTB Capital and director at Macquarie Agricultural Funds Management.
“It’s a land-light focused fund, investing into category champions that are investing along the various stages of the high-value food chain,” Silm told PEI.
The Cibus Fund will invest across the value chain, including into: input suppliers, such as producers of seeds, fertilisers, chemicals and machinery; land-light producers, such as nuts and high-value fruits, meat production and aquaculture; processors and value-adders; and distributors and logistics providers.
The fund’s “sweet spot” is vertically integrated companies across the second and third stages – “producers that are vertically integrating and adding further value,” Silm said.
“[This] improves margins, decreases volatility and gets them closer to the large, emerging market food buyers who are amongst the most acquisitive groups in M&A globally. They are one of our core, high-probability exit options.”
ADM Capital intends to invest 40 percent of the fund into companies based in Australia and New Zealand, 40 percent into the UK and Europe, and the remaining 20 percent into other OECD countries, primarily the US and Canada. While only investing into developed countries, the fund will seek companies which supply emerging markets.
“You have an emerging market factor and driver within the fund strategy, but you’re only investing into developed markets,” Silm told PEI.
The majority of the fund – 90 percent – will be invested in mid-market companies with an EBITDA of greater than $3 million, which the firm will hold for between four and six years. The fund will invest an average of $45 million in 10 to 11 deals. For this part of the fund, ADM Capital will be seeking an internal rate of return of between 20 and 25 percent, and a return on invested capital of 3x.
The remainder is earmarked for ‘high growth’ companies in the agritech space. The Cibus Fund will not be making venture investments, but backing commercial enterprises, investing an average of $7 million in seven transactions.
“We anticipate very high growth rates from disruptive technologies, breaking the linear chain between carbon-based inputs and productivity,” Appleby said, adding that the goal is to look at how to “make more with less”.
“There are higher risks associated with the stage of growth of these companies, and expected higher returns.”
A team of around 13, split between Sydney and London, will work on the Cibus Fund, including a senior investment team of five.
It is understood that the Cibus Fund is close to closing its first two transactions.
The Cibus Fund is Guernsey-domiciled, has an eight-year fund life with the possibility for two one-year extensions, and has an investment period of five years.
There are three LPs in the first close: two cornerstone investors – Nasdaq-listed insurance group Arch Capital and a public pension fund – and the ADM Capital partners. Both external investors are existing ADM Capital LPs.
ADM Capital will make a GP commitment of between 1 and 2 percent of the fund’s final size.
Appleby said the fund has attracted interest from a broad range of investors, including sovereign wealth funds, university endowments, pensions funds, insurance companies, and family offices.
Commenting on the possibility of political challenges across Europe affecting agriculture, Appleby noted a “very complex mix of opportunities and risks”, but added that, whatever the outcome, Brexit and the UK’s renegotiation of its relationships with other countries “spell opportunity, particularly as the UK embarks on becoming a world leader in [areas] like technology and big data and its application to food”.