Aqua Capital’s Novus Ag deal signals ‘Brazil to North America’ strategy

Aqua Capital’s acquisition of Colorado-headquartered ag retail distribution network Novus Ag is part of the firm’s expansion into North America, head of business development Gustavo Eiben told Agri Investor.

The Sao Paulo-headquartered firm’s $173 million Fund I focused on Brazil and its $370 million Fund II pursued a broader Latin American strategy.

“A year and a half ago, we had a conversation with our LPs to basically extend to North America,” said Eiben, who held positions at UBS, JPMorgan and the Rohatyn Group before joining Aqua in early 2021, according to his LinkedIn profile.

“Our Fund III, it’s an Americas fund, all the way from Brazil to North America. This is important background to understand why we have done Novus,” he added.

Novus has a network of 30 suppliers operating through 50 retail locations that offer farmers crop protection, fertilizer and seed treatment products alongside agronomy services. The deal was closed in April.

Eiben declined to comment on fundraising for Fund III, which had raised at least $309 million from at least 24 LPs towards the vehicle’s $400 million target, according to May regulatory filings for three vehicles connected to the fund. A source told Agri Investor the firm had surpassed its target for Fund III.

Aqua was established in 2009 and its previous vehicles have attracted commitments from a combination of public and private pension plans, funds of funds, developmental finance institutions and others. Eiben said Aqua’s most recent efforts have seen the firm’s LP base evolve to include more investors committing from sustainability-focused allocations.

“These are very, very much commercial-type LPs. They would still ask for 25-30 percent IRRs, three times money but our sector and our strategy is leading very nicely to tackle some of the sustainable themes they also have in mind: climate, resource efficiency, regenerative agriculture and traceability of food,” he explained. “These types of themes landed very nicely.”

Novus was founded in 2013 and its products and services include advice and analysis through its Novus Knowledge offering; crop nutrition products from Innova Resources and a foliar spray called Hype that improves corn and soybean yields.

New York-based Aqua partner Eli Ziskind said although Aqua does not define itself as an impact investing firm, plans for Novus’ growth reflect the increased demand for sustainability from investors.

“It’s easy to imagine the impact of a product. If you think about it, the real challenge is getting these products into the farmer and that’s exactly what Novus could do,” he said. “Our idea is to double-down on Novus’ role as a conduit for new sustainable technology into farmers.”

Investments from Aqua’s second fund included AgroGalaxy, an ag inputs retailer and grain handling platform active across nine Brazilian states that has executed eight acquisitions since 2016.

“While there’s no direct synergies between that and our investment in Novus, we are probably among the most experienced investors in the world within the space of ag retail and services,” said Ziskind.

“These businesses have some complexities, managing working capital, managing service areas, managing farmers. There is an operational thesis behind it and we definitely took our playbook from Latin America, adjusted it, and applied it here.”