Agro Merchants Group, an Oaktree Capital Management-owned cold storage and logistics provider, has acquired New Jersey-based meat delivery service business Transmode in the latest sign that private equity is warming up to the sector.
Transmode moves refrigerated containers from port to processing plants and offers further transportation and distribution services to the meat industry in the US north-east. Most of its customers are located in Philadelphia. Founded in 1995, Transmode already serves existing Agro Merchants facilities, as well as about 20 smaller cold storage providers.
“This business combination gives us scale and operational benefits to better support our customers’ supply chain,” said Agro Merchants North America president Dave Moore.
Transmode owner, Vince D’Anella, will join Agro Merchants as director of transportation as part of the deal. Financial terms were not disclosed.
Agro Merchants chief executive Carlos Rodriguez told Agri Investor that Transmode is one of several potential acquisition targets the company has been communicating with since its founding in 2013.
He explained that the US north-east is already an important market for Agro Merchants Group and the move to expand the services it offers in Philadelphia is significant given that the city’s port is the largest entry point for refrigerated products in the US.
Cold comfort
Agro Merchants plans to continue efforts to enhance its presence in the north-east, according to Rodriguez, who added that the company is also considering expansion elsewhere.
“We also have a strong presence in Savannah, Georgia, and that area that we want to reinforce. We have presence in Oakland and we definitely would like to increase our presence there,” said Rodriguez.
Outside the US, Rodriquez said Agro Merchants Group is looking at several deals in Europe.
Founded in 2013 with what a source told Agri Investor last July was a $300 million investment from Oaktree, Agro Merchants operates more than 7.5 million cubic meters of temperature-controlled warehouse and distribution space. Overall, it runs 63 facilities across the US, UK, Austria, Ireland, Spain, Portugal, Australia, Brazil, Chile and the Netherlands.
In July 2017, it acquired Poland Services Transport Logistyka, a cold storage provider headquartered in Gdansk, Poland. In December, Agro Merchants bought UK-headquartered Grocontinental, a cold storage service provider.
“We have started to try to be a consolidator in the industry and we can see that there are number of parties that are trying to follow the same approach,” said Rodriguez.
In November, Blackstone acquired Iowa-based cold-storage provider Cloverleaf. At the time, a source familiar with the deal told Agri Investor that it came after a year’s study of the sector. Managing director David Kestnbaum said then that the firm planned to continue Cloverleaf’s efforts to build a “market-leading platform within the cold storage industry.”
Public and private swirl
“There have been a number of other private equity firms that are starting to circle the industry,” a source familiar with the Transmode deal told Agri Investor.
The source explained that an important milestone for the market came in January, when Atlanta-headquartered cold storage provider Americold completed an initial public offering on the New York Stock Exchange. Before the listing, the source said, many investors were reluctant to enter what was seen as a cottage industry with few long-term contracts.
Since then, the source said, analyst coverage of the stock has helped educate investors about a sector that stands to grow further as large food companies continue to outsource important non-core services like storage and transportation. While long-term contracts are rare in the cold-storage industry, the source explained, the provision of extra services like the delivery Agro Merchants can offer in Philadelphia through its acquisition of Transmode is an example of steps companies can take to retain customers.
“Ultimately, it’s an attractive, growing asset class,” said the source.
After an initial closing price of $17.77 per share in late January, Americold’s stock closed at $21.68 per share on Friday.
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