Exclusive: Summit Ag expects $75m first close for $300m agribiz fund

Chief executive Bruce Rastetter says the vehicle will target annual returns of more than 20 percent by investing in mid-cap companies in mid-stream agricultural businesses located in the US Midwest.

Summit Agriculture Group, a private equity firm headquartered in Alden, Iowa, expects to reach a first close on $75 million next month for the agribusiness fund it launched in April, according to its chief executive.

The Summit Ag Opportunities I fund has a target of $300 million and had raised $5 million as of April, according to a regulatory filing.

Bruce Rastetter, Summit’s founder and chief executive, told Agri Investor that about half of the investors in the fund are families from the Midwest with some connection to agriculture, and that commitments have ranged between a minimum of $500,000 and $15 million.

Rastetter added that his firm is also working together on the fund with William Laverack, a senior advisor to Tiger Infrastructure Partners and chief executive at Laverack Capital Partners, and Emile Henry, chief executive and managing partner at Tiger Infrastructure. Tiger is also an investor in the FS Bioenergia Brazilian corn ethanol plant that Summit opened last year.

“We have a close working relationship with a Tiger Infrastructure fund that Emil Henry heads,” Rastetter explained. “Both of those individuals and firms are well-respected and credible. What [the partnership with Laverack and Henry] has given us is that it has allowed us to help broaden our network in New York, beyond what we already had.”

In addition, Summit’s experience working with investment banks has helped the firm establish its reputation among the high-net-worth individuals and family office investors that Rastetter said have recently exhibited greater interest in agriculture compared to five years ago.

The firm had previously raised single purpose vehicles to fund specific projects, but Rastetter said Summit opted for a fund this time in part due to feedback from its LPs, some of which had previously brought investment opportunities to the firm that it was not in a position to pursue.

“We haven’t always been able to be agile enough, without having a fund dedicated to it, to be able to implement that strategy,” he said. “So, we want to have the fund be able to implement those private leads that we get on opportunities to work with companies.”

Mid-cap, mid-stream, Midwest 

Summit Ag Opportunities I will target more than 20 percent annual returns by investing in two or three mid-stream, mid-market companies per year over the next three years, Rastetter said. Asked for examples, Rastetter mentioned value-added protein and commodities processing, ag manufacturing and inputs as sectors the firm hopes to explore. Summit plans to use capital from the vehicle to secure controlling stakes in up to eight agricultural businesses with annual revenues of between $25 million and $200 million, he noted.

“We think there are a number of successful Midwest ag businesses that have a need for private equity, in particular because of the age of the owner and the lack of succession planning,” Rastetter said. “We think we will fill a significant void and provide an opportunity for those people to partner with people who are like-minded.”

Iowa ag’s voice

Rastetter, recently described by Bloomberg as “literally the voice of political agriculture within his State,” hailed President Trump’s trade policies and described how US producers have had their access to important Chinese markets hampered by changes in specifications required for soybeans and ethanol imports.

“We, in particular, support the efforts that Trump is doing – in China, the European Union, Canada; it looks like Mexico is soon to be resolved – to have those countries open to the various segments of US agriculture,” Rastetter said. “The changes in the tax bill are helpful and the deregulation that’s happening will help build stronger companies in the US that we can invest in.”

Combined with increased take-home wages that have come as a result of January’s tax reform, Rastetter said Trump’s efforts to address long-standing trade challenges have inspired a sense of optimism that helps explain continued support for the president in the Midwest.

That support does, however, have its limits.

“Of course, if he shot someone on Fifth Avenue, I’d stop supporting him,” said Rastetter.