Instar Asset Management has partnered with the management team of Greenwood Mushroom Development to acquire a majority stake in the business from Novacap. Financial details were undisclosed.
Greenwood Mushroom is a Canadian controlled-environment agriculture businesses that supplies mushrooms to Canada and the US.
Instar managing partner Morty White told Agri Investor it was drawn to the Greenwood opportunity because it views it “less as a food business and more of an agricultural infrastructure business that meets an essential [food security] need,” said White.
“This sector meets our investment criteria and I do think it’s just the tip of the iceberg for Instar. We’ve looked at a lot of investments in vertical farming and in greenhouses, which support local agricultural systems and resilience,” he added.
Capital was deployed from the firm’s InstarAGF Essential Infrastructure Fund II, which closed on $1.2 billion in 2020. Agricultural infrastructure is one of four core themes for the strategy, which includes mobility, connectivity and new energy transition.
“In Canada, there is stability in the demand for mushrooms,” explained White. “When we look at investment criteria these days we do take into account price inflation and we take into account labor inflation. We look for businesses that are distinctive or specialized with a clear competitive edge, which has a certain stability to it.”
Other areas of agricultural infrastructure that are of interest to the strategy include subsectors such as transportation, storage, seed propagation and irrigation. The firm also has an interest in forestry infrastructure and invested in Canadian forest seedlings business PRT in 2021.
White said Instar’s investment in Greenwood will allow the business to continue to grow “both within their markets and in new markets.” He clarified that an expansion into other products “is not on the cards right now,” but the firm is ready to support the management team to grow the business as they see new opportunities.
The managing partners declined to disclose any business performance figures about Greenwood Mushroom. A statement from the firm said the Canadian business produces 29 million pounds of mushrooms per annum.
He added that Instar typically invests in mid-market businesses with enterprise values between $100 million and $500 million.
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