First look
Carlyle dives into European irrigation market
Four acquisitions since last year have marked the launch of Farmfront Group, a Milan-headquartered irrigation platform established by Carlyle Group.
Soon after announcing the latest in that series of deals and formal launch of the new company, Carlyle partner Filippo Penatti told Agri Investor that the entry into irrigation reflects a focus on the green economy and intention to further develop expertise in ag.
Carlye’s Farmfront investment drew from the fifth iteration of its Europe Partners vehicle, which closed on €6.4 billion in 2019 with commitments from more than 300 LPs from around 35 countries.
“This deal has received a lot of attention from our LPs,” said Penatti. “A lot of attention to understand the deal and also willingness to put in additional capital if needed. We see that this is a sector that actually resonates quite well within our investor base. Maybe more than others.”
Farmfront is led by Daniel Neves, who previously served two years as president for Southern Europe at Israel-headquartered irrigation provider Netafim. He told Agri Investor that the company plans to begin with a strong focus on Europe, where it has six manufacturing facilities across Italy, France and Spain that support sales to more than 100 countries.
He highlighted that just 18 percent of global arable land is currently irrigated, and said Farmfront’s long-term plans include potential expansion into the Americas, Asia and the Middle East.
“The opportunity we have here in terms of growth will definitely attract many kinds of different investors when the time for exit comes,” he added.
The €200 million annual turnover of the four acquired companies already makes it the largest player in the European mechanical irrigation market, according to Carlyle. Both executives mention drip as the likely focus of future growth efforts aimed at offering farmers a one-stop-shop across irrigation technologies.
Read the full story here.
They said it
“You can’t swap one cow for a lower-emissions cow. Agriculture has been found wanting on not necessarily having the answers as to how to start its journey to a lower emissions future”
KPMG International global head of agribusiness Ian Proudfoot discusses some of the emissions reduction difficulties agriculture has had in comparison to transport, for example, where EVs have been a good first step.
Regulation
Rabobank surveys Green Deal’s agri impact
Legislation on pesticides, water quality, greenhouse gasses and biodiversity will have the greatest impact among the “overwhelming” range of initiatives grouped under the European Union’s Green Deal, said a Rabobank study.
The report provides a breakdown of the varying degrees to which livestock farming, dairy production, arable farming and horticulture are likely to be impacted by ambitions grouped under nine themes and pursued through EU frameworks that include the Farm to Fork strategy, the Biodiversity Strategy for 2030 and the Fit for 55 package.
Rabobank reports that the impact of stated ambitions on reducing antimicrobial sales and encouraging new business models are expected to have a medium impact, while it is too soon to gauge the effect of plans to meet ambitions on animal welfare still at earlier stages of development.
“The European Commission is aiming to find a new balance between sustainability on the one hand, and nature and sustainability on the other,” analysts wrote. “Also, the Green Deal creates a critical mass for innovative solutions in the European market. This will boost opportunities for innovative techniques, products and practices.”
In an embedded Q&A, Rabobank senior relationship manager and adviser on EU affairs Martin Reesink suggested the financial implications of the Green Deal might come into sharper focus in future iterations of the legislative process.
“The EU should come up with a vision for the future of agriculture that explains what kind of agriculture it is advocating for in Europe, and what the business model is for farmers,” he said.
“Does it focus on self-sufficiency or export? Is it high-tech and intensive or low-tech and extensive? What is the ratio of plant-based protein to animal protein? I think it would be worthwhile for the EU to examine what regenerative agriculture could contribute to the future of European farming.”
Fund watch
Gresham House closes UK forest fund on £300m
London-headquartered asset manager Gresham House closed its UK-focused Forest Growth and Sustainability Fund on its £300 million ($369 million; €346 million) target.
The vehicle received commitments from family offices, private investors and institutional investors including the Scottish National Investment Bank, the Pension Protection Fund, Worcestershire Pension Fund, East Riding Pension Fund and the National Trust to support a strategy focused on sustainable timber harvesting and carbon credit sales.
Managing director Olly Hughes told Agri Investor that growing interest in forestry’s carbon sequestration potential comes at a time when LPs are still in the early stages of their sustainability journeys and wary of committing too far in any one direction.
“Some people are saying they would like to be able to utilize that carbon for their own in-setting or off-setting purposes,” said Hughes. “Others are saying they would like to source carbon in the future for their own purposes of cash return. Others are saying they may have a hybrid of the two.”
Read the full story here.
Industry
Bain & Company call for “elevated ambitions” in food and ag
Food and agribusiness companies that fail to elevate their ambitions around key health and environmental challenges could face risks that include taxes on sugar and salt.
In the report, Can Food and Agriculture Companies Raise Their Game, Bain noted that 85 jurisdictions worldwide have enacted such restrictions, and calls for required health labelling are gaining steam. The consultants predicted that a scenario of more such aggressive regulation would produce outcomes varying from a 15 percent revenue uplift over the next five years for proactive companies and an up to 43 percent decline for companies that fall behind demands of the market.
“Success requires companies to elevate their ambitions, reinvent portfolios, accelerate the agricultural transformation and change their organizations to deliver on the new imperative,” analysts wrote.
The report highlighted the kind of actions that will be necessary, citing PepsiCo’s proactive steps to reduce sodium content of its products; Nestle’s 20 acquisitions and 10 business unit sales between 2017 and 2022; and the Cargill-backed Soil and Water Outcome Fund. It also praised steps taken in Canada beginning in the 1980s to create and sustain an ecosystem supportive of regenerative practices that has propelled that country’s attention to soil health well ahead of its developed world peers.
The report also notes that the $13 billion invested in sustainable food systems in 2021 was larger than the $4 billion research and development spending of the top 10 global food companies.
“This magnitude of venture funding to solve the problems of health and sustainability shows these issues are already a major focus among private investors. Now the question is whether food companies will get ahead of this imperative or be disrupted by it.”
Read the full report here.
Deals
New Forests’ Forestry Fund II sales continue
Following New Forests’ divestment of forest management company Forico and the largest hardwood estate in the Australian state of Tasmania to a consortium of investors last month, the firm has listed an additional four assets from its Australia and New Zealand Forestry Fund II.
The estates consist of radiata pine plantations and produce wood for commercial uses in the domestic and international markets, and all apart from Taupo are freehold. The estates cover a combined area of 16,000ha.
“We have managed these assets on behalf of investors for 10 years and over this time [have worked] closely with the on-the-ground property managers, have increased production, improved efficiencies and added sustainability metrics to improve the overall health of the assets,” said New Forests managing director, Australia and New Zealand, David Shelton in a statement.
Read the fully story here.
VC fundraising
Toopi Organics, a French start-up developing biostimulants derived from human urine, was awarded €8.4 million from the European Union-backed EIC Accelerator.
4AG Robotics, a British Colombia, Canada-headquartered company developing an autonomous mushroom harvesting robot that formerly operated as TechBrew Robotics, raised $17.5 million in equity financing through a round that included state-linked development vehicles, family offices and Saskatchewan-headquartered Lex Capital.
Bio-Logical, a Kenyan start-up with plans for a network of biochar production facilities, raised $1 million in seed funding from a group that included family office platform Steyn Group and individuals.
Aigen, which is developing solar-powered autonomous robots for crop management and headquartered in Kirkland, Washington, raised $12 million in a Series A round led by Australian venture capital firm ReGen Ventures.
Also in the news…
Antitrust focus lands on poultry
Privately held poultry processor Koch Food Industries was charged with violations of the Sherman Act and the Packers and Stockyards Act on allegations it imposed termination penalties on growers who switched to rivals (Department of Justice).
Manulife reaches fist close on carbon-focused timber fund
Manulife Investment Management has secured $224.5 million towards a $500 million target to support a Forest Climate Fund strategy in which carbon sequestration is prioritized over timber production (New Private Markets).
Famed farming family patriarch dies
John Kahlbetzer, a 92-year émigré from Germany with a long history in farming in Argentina and his adopted home of Australia through family-owned Twynam Agriculture Group, died in Sydney in late October (Australian Financial Review).
Temasek-backed DeHaat acquires fruit export unit
India-headquartered DeHaat, a start-up backed by Temasek developing farming sector efficiency technologies, acquired the fruit export business of Indian headquartered processor Freshtop Fruit for an undisclosed price (VC Circle).
EY agbiz exec departs for Kearney
Rob Dongowski – who served as a partner at consultancy EY for more than 20 years in two stints mostly focused on the food system that included building its Global Agribusiness Center – has joined the consumer industries and retail practice of Kearney, a consultancy headquartered in Chicago (Kearney).
Today’s letter was prepared by Binyamin Ali, Chris Janiec and Daniel Kemp.
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