Paine Schwartz backs animal nutrition with Fund IV investment

MS Biotech has commercialized a product that helps cattle and dairy farmers reduce labor and forage costs by accelerating the transition to high-concentrate diets.

Paine Schwartz Partners has made a “strategic” investment of an undisclosed size in MS Biotec, a company that provides products and services designed to maximize performance of beef feedlot and dairy producers.

Capital for the investment came from the New York-headquartered firm’s Food Chain Fund IV, which surpassed an initial target of $800 million before closing on $893 million in late 2015.

MS Biotech bills itself as the only commercial-scale producer of a probiotic using lactate (Megasphaera elsdennii) that accelerates the transition from roughage to high-concentrate diets for cattle, allowing for reduced forage and labor costs. Headquartered in Denver with manufacturing facilities in Wamego, Kansas, MS Biotec has already brought its probiotic product to market under the Lactipro Advance brand.

“The effect is most apparent during the first 30 days on feed as cattle consume less feed during this time. Afterwards, feed intake is similar to conventional cattle minus Lactipro Advance,” MS Biotec said in a description of the product. “Because the step-up program can be altered to contain a greater proportion of more digestible feed ingredients early in the feeding period, there is potential for significant hay savings if this is desired.”

Paine Schwartz chief executive Kevin Schwartz said the firm planned to support MS Biotec in their development of new products, applications and markets in order to capture demand fed by an increasing focus on sustainable and efficient production of beef and dairy products.

“We have spent significant time analyzing the animal health industry and MS Biotec represents the type of sustainable agribusiness investment we are targeting with our growth equity strategy,” Schwartz said.

A source familiar with cattle and dairy markets told Agri Investor there has been continued growth in grass-fed beef demand this year, which is increasingly motivating producers and investors to explore investments in animal nutrition.

“My hunch is that there’s probably blood in the water in the dairy industry,” the source added. “The only way you are going to make it work is if you are more efficient, so the next wave of efficiency is going to be health of the soil and health of the animal.”

Paine Schwartz is currently seeking to raise $1.2 billion for the next iteration of its flagship fund, which secured a commitment of $40 million from the $9.24 billion Sacramento County Employee’s Retirement Association late last month.

Paine Schwartz declined to comment further.