Hancock acquires Brazilian timber amid regional expansion – exclusive

Head of timberland investments Tom Sarno says the firm has recently added a director of acquisitions for South America and plans to expand across Brazil, Chile, Uruguay and elsewhere.

Hancock Natural Resources Group has acquired land use rights to 43,332 hectares of Brazilian timberland as part of a broader effort to expand its regional portfolio.

The Manulife Investment Management subsidiary closed its first Latin American deal of the year in January when it entered the Chilean ag market with the acquisition of majority stake in fruit exporter David Del Curto. This was followed by a timberland deal in March when the firm purchased 12,874ha of eucalyptus plantations in Mato Grosso do Sul, Brazil.

The latest deal saw Hancock affiliate Rio Verde Holdings acquire two operating companies with land use rights for properties in Mato Grosso do Sul from Copa Gestao de Investimentos, a Sao Paulo-headquartered investment firm focused on timber founded in 2012. Financial details were undisclosed.

“We’re really putting together a South America strategy rather than simply a Brazil strategy,” global head of timberland investments Tom Sarno told Agri Investor. The firm’s regional expansion plans have also included in the addition of new staff.

Sarno explained that Hancock previously managed a portfolio of 45,000 acres of Brazilian timberland that came as part of its 2005 acquisition of Prudential Timber. After having managed those assets for about 10 years, he said, this year’s acquisitions represent a return to the country for Hancock.

“Those timberlands [HNRG previously managed in Brazil] were largely in the form of, similarly to what we have now, self-liquidating timber deeds,” he explained. “As we harvested the timber that we had rights to and the land was handed back, that investment naturally followed its course.”

Regulatory changes during the years since Hancock exited its previous investments in 2016 limited the ability of foreign buyers to directly control property in Brazil. Those regulations help explain, according to Sarno, why recent acquisitions have been of trees and land use rights, rather than timberland properties.

“Should that law change, we are interested in being both timber and timberland owners in Brazil,” he added.

Hancock has retained relationships in Brazil and continued prospecting for deals and monitoring business conditions throughout, Sarno said. The decision to re-enter now, he explained, was motivated by exchange rate conditions and the opportunity for exposure to “blue-chip” properties such those involved in this year’s deals.

“In Brazil, you can break it down to [regional] sub-categories ranging from ‘frontier’ to ‘right in the thick of the markets,’ which are what these most recent investments were and that’s largely where we focus our attention,” he said.

A statement from Hancock noted its most recent acquisition is for rights to produce from assets well-positioned to supply near-by pulp producers supplying bleached eucalyptus kraft paper mills. Sarno said in the statement strategic partnership with “key Brazilian counterparties” was a focus for the firm.

He declined to identify specific partnerships to Agri Investor beyond confirming Hancock has established relationships with offtake partners that are key to the recent investment. In an April 2019 research note, Hancock highlighted the previous year’s merger to establish Suzano, a Rio de Janeiro-headquartered company, which it wrote has more pulp capacity than any other in the world.

“The successful creation of the new Suzano should help dispel the cloud of uncertainty surrounding the possible paths for the expansion of Brazil’s market pulp sector over the coming decade,” said the report.

Hancock is interested to expand in both eucalyptus and pine focused timberland markets within Brazil, Sarno said. In May, the firm added a Sao Paulo-based regional director of acquisitions, Heitor Luis Gut Gastaldi, who Sarno said is working with US-based executives in an active search across South America.

“We have experience in both Chile and Brazil, so those are attractive to us,” Sarno added. “We also think Uruguay provides certain attractive opportunities and then there are some other countries that we would consider.”

According to his LinkedIn profile, Gastaldi previously spent eight years in timber-related positions at Brookfield Brazil and joined Hancock after three years with a Rio de Janeiro-headquartered natural gas transportation company.