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OTPP buys Australian avocado producer

Managing director Stephen McLennan tells Agri Investor the strength of domestic demand drove the purchase of Jasper Farms and that any future export growth will constitute an “interesting tailwind” for the investment.

Ontario Teachers’ Pension Plan has acquired Jasper Farms, an Australian avocado producer, the $141 billion pension announced Wednesday.

Financial details were not disclosed. Jasper Farms owner Neil Delroy told a local media outlet last month the deal was valued at “not quite” the $180 million figure previously reported.

Jasper Farms covers 360 hectares spread over two properties that are close to each other, near the city of Busselton in the South West region of Western Australia. The company describes itself as Australia’s second-largest avocado producer.

OTPP managing director Stephen McLennan told Agri Investor that the investment in Jasper Farms was borne out of OTPP’s focus on nut and fruit crops and its past experience in Australian agriculture. In August 2015, OTPP paid A$115 million ($85 million; €77 million) for a 99 percent stake in Aroona Farms, an Australian almond producer.

Australia is well endowed with opportunities aligned with OTPP’s efforts to construct an agricultural portfolio that will provide diversified sources of return in a variety of economic environments, according to McLennan.

He also said the company had a desire to access the growing avocado market in Australia, where many consumers have started to consume the fruit as part of a broader trend towards healthier diets. According to trade group Avocados Australia, annual consumption of avocados in Australia has grown from 1.25 kg per capita in 1998 to 3.5 kg per capita last year.

“Avocados are an interesting crop because they have a very interesting nutritional profile, which we think will continue to grow in demand,” McLennan said. “We do think that certain export markets are under-consuming of this particular crop, so any increase in that will be an interesting tailwind to the underlying business,” he added.

McLennan said OTPP continues to view permanent crops as “relatively non-institutionalized” in terms of investors and that the pension will continue to look for ways to deploy capital to the subsector.

The Costa Group, the Paine Schwartz Partners-linked Australian fruit and vegetable producer, which purchased a combined avocado orchard and packing facility together with Macquarie Agricultural Funds Management in December, was also reported to have been interested in Jasper Farms.

McLennan declined to comment on the level of competition for Jasper Farms, or on the need for approval from Australia’s Foreign Investment Review Board, saying only that OTPP had pursued a “very constructive dialogue with the requisite authorities.”

Looking ahead, McLennan said it is too soon to say what kind of changes Jasper Farms may face and that operations would remain largely unchanged in the immediate future.

“The business has quite a successful track record and in many instances, you’re better off not fixing what’s not broken,” McLennan said.