Aqua backs Brazil biologicals company with $30m

Managing partner Sebastian Popik tells Agri Investor that intense competition in Brazil’s biologicals market inspired the firm to build their own company before buying a stake in Total Biotechnologia.

Sao Paulo-headquartered Aqua Capital has invested more than $30 million in exchange for a majority stake in Total Biotechnologia, a Brazilian company offering biological inputs designed to enhance agricultural sustainability and crop yields.

Capital for the investment came from Aqua Capital Agribusiness Fund II, which closed on its revised hard-cap of $370 million in mid-2017, despite what its managing partner labelled a “tsunami” of economic and political headwinds.

Based in the city of Curitiba, Total was founded in 2005 and offers biological fertilizers and seed treatments for crop development, nutrition and protection. Its more than 35 offerings include products designed to improve yields in soybeans, add probiotics to animal feed and increase nitrogen in cowpea plants, among others.

Aqua’s investment in Total was finalized in mid-December and translates into a more than 80 percent stake. The firm plans to merge Total with Biotrop, a Sao Paulo-headquartered biologicals company Aqua created in late 2017 in collaboration with Antonio Zem, a former executive with Philadelphia-headquartered crop protection company FMC Agricultural Products.

The merged company will operate as Biotrop.

“We like the sector a lot, there are strong fundamentals,” Aqua managing partner Sebastian Popik told Agri Investor. “At the same time, it’s difficult to find interesting companies that have real proprietary technology, proven research and some market presence; at least for anything reasonably priced.”

Echoing themes highlighted within a recent Finistere Ventures report about Latin American agtech, Popik said investor interest in Brazilian agtech has outpaced the market’s overall development, creating an intensely competitive dynamic.

“We had almost given up on getting any deal done and started our own effort with Biotrop from scratch,” added Popik. “Then we were able to get a very good company with very reasonable terms.”

That biologicals are among the fastest-growing sub-sectors within agriculture is clear to both financial investors and strategics active in Brazil, according to Popik, who added that there are currently far more buyers than sellers.

“Sometimes we see this in some higher-tech, specialty segments, where there are many more interested parties wanting to acquire something – be it a controlling or minority stake – than there are good companies to be bought or sold,” said Popik. “Biologicals clearly fits that pattern, both in Brazil and in the US.”

Most of the products Total sells are used in conventional farming, Popik said, highlighting that while Biotrop stands to benefit from any future expansion of organic production in the region, the company will not be reliant on such an expansion to support its growth.

Within the region, Popik said, Aqua plans to focus on bringing Biotrop into the burgeoning markets of Colombia and Peru, in addition to continuing focus on what he described as  established markets in Brazil and Argentina.