KKR backs Australian arid climate agribusiness

The private equity firm will invest at least $100m in Sundrop Farms from its $6bn Asia Fund II.

Global private equity giant KKR has provided growth capital to Sundrop Farms Holdings, an Australian agribusiness that specialises in growing crops in an arid climate.

The capital will be used to significantly expand its glasshouse facilities in South Australia, according to a statement.

The investment will be made out of KKR’s Asia Fund II, which closed on $6 billion in July 2013, and a source close to the deal said that it was $100 million in size, although the firm did not disclose that information.

This is at least the second agriculture-related investment KKR has made from Asia Fund II; it led a $240 million buyout of COFCO Meat, the Chinese meat producer, in June. The firm also bought a minority stake in vertically-integrated chicken meat producer Fujian Sunner Development in August but did not disclose the investing vehicle.

The firm’s European Fund III, a €6.79 billion, 2008-vintage fund, has also invested in the sector, buying an Ethiopian rose grower and distributor for $200 million in June.

Sundrop Farms grows crops in state-of-the-art glasshouses using proprietary technology developed to address water and food security issues typical to dry regions. The system uses concentrated solar power to create the heat, electricity and desalinated water needed to feed and power the farm’s operations.

KKR’s investment will be specifically used to grow Sundrop’s existing operations in South Australia by financing a 20-hectare greenhouse facility, which will produce over 15,000 tonnes of vegetables per year for domestic consumption. The South Australia State government is also in line to provide funding for the project over the next three years, according to a press release.

Sundrops Farm has signed a 10-year contract with Coles, an Australian supermarket chain, to supply tomatoes.

“By entering into a 10‐year deal to buy Australian‐grown tomatoes from Sundrop Farms, we are supporting an enterprise which is redefining sustainable agriculture in Australia,” John Durkan, managing director of Coles said in a statement.

KKR’s role will go beyond Australia and will help Sundrop expand its distribution to the Middle East, North America and other supply-constrained markets globally.

“Sundrop Farms provides a unique and innovative solution to environmental challenges in farming,” said Justin Reizes, head of KKR Australia, in a statement.

“KKR looks to invest in and partner with companies that provide solutions to environmental and societal challenges. Sundrop Farms epitomises this effort, and we are delighted to work with this experienced and knowledgeable team to pursue new growth opportunities in Australia and internationally.”

The firm has been strengthening its hand in Australia, with Tony Schultz joining the Sydney office as a managing director dedicated to energy and natural resources in the region in March. Frances Lim, a director in the firm’s global macro asset and allocation team, will also be relocating to Sydney by the end of the year.

KKR Capstone, the operational firm tied closely with the global private equity firm, has also recently bolstered its Australia capabilities, appointing appointing Matthew Claughton as a director in its Sydney office in November.

KKR has been rapidly deploying its second Asia Pacific vehicle, targeting markets across the region. Other deals from the fund include the $1.6 billion Panasonic Healthcare buyout in Japan, a $1 billion investment in Singapore-listed United Envirotech with Chinese conglomerate CITIC Group.

Meanwhile, KKR continues to focus on its green portfolio initiatives. In October, the firm revealed its ESG measures have now cut nearly $1.2 billion of costs and boosted revenues, having reduced its portfolio’s greenhouse gas output by more than 2.3 million metric tons between 2008 and 2013 – the equivalent of powering 217,000 homes and driving 156,500 cars for a year.

Reporting by Clare Burrows.