Paine Schwartz closes AgroFresh take-private

Paine Schwartz Partners has closed the take-private transaction in which it acquired the remaining interest it did not already own in AgroFresh Solutions, a Dow Chemical-spinout whose offerings extend the shelf life of produce.

The deal was agreed in October and sees the firm purchase the remainder of outstanding shares at a price of $3.00 per share, a premium over a closing price of $1.57 per share the day before the deal’s announcement.

According to a regulatory filing, the New York-headquartered firm has provided a $200 million equity investment to support the transaction drawn from Paine’s Fund VI.

Paine Schwartz chief executive and managing partner Kevin Schwartz told Agri Investor the firm has been following AgroFresh for more than 10 years due to its leading role in reducing food waste. Paine Schwartz invested $150 million from Fund V into AgroFresh in a mid-2020 transaction that gave it preferred stock equivalent to 36 percent of outstanding shares in the company, which traded on the Nasdaq exchange.

Schwartz explained that despite that effort, AgroFresh faced legacy debt challenges it was unable to overcome.

“The company couldn’t – in that format, in our opinion – take advantage of all the opportunities for growth and value creation and development of new products or expansion into new geographies or M&A,” said Schwartz. “We saw the opportunity to then take the company private, reduce the leverage, increase the equity capitalization and position it now with this latest public-to-private transaction to fully realize its potential in this incredibly important segment of food and agriculture.”

He confirmed the $250 million term loan extended in December to Project Cloud Holdings  – an entity created for the AgroFresh acquisition – by PGIM, JPMorgan, Rabobank and others is the type of facility the company would otherwise be unable to access.

Looking to public markets

Philadelphia-headquartered AgroFresh was founded in 1996 as a collaboration between Dow and chemical manufacturer Rohm and Hass. It provides pre- and post-harvest products, technologies and services to customers in more than 80 countries. Its primary offering is SmartFresh, a coating applied to apples post-harvest to delay softening and over-ripening.

Dow sold AgroFresh to Avenue Capital-backed Boulevard Acquisition Corp for $900 million in a 2015 merger that brought AgroFresh onto the Nasdaq exchange.

The recent filing explains how among the issues addressed by a special committee created to advise AgroFresh on the transaction, was the expected erosion of SmartFresh earnings through competition from generics and the fact meaningful growth through new product lines is not expected until 2026. Schwartz noted SmartFresh already competes against generics in apples and added Paine Schwartz’s ambitions for expansion include use of the product in essentially all fresh produce.

“Beyond expansion by crop, there are pre-harvest and other post-harvest solutions like fungicides, coatings, disinfectants as well as digital technology solutions that the company is taking to market,” he added.

AgroFresh is the only take-private among the four deals Paine Schwartz has already closed from Fund VI, according to Schwartz, who added it comes at a time when turmoil across markets has encouraged investors to be flexible about deal type.

“Public market valuations are down materially over the past six months or upwards. It shouldn’t be a surprise there’s a greater opportunity now to look at the public markets for interesting opportunities,” he added.

The filing makes clear that although there were no direct negotiations between Paine Schwartz and Dow, AgroFresh’s former parent was an active participant in a process that eventually involved outreach to 45 parties and discussions with five of them. Schwartz declined to comment on Dow specifically beyond reminding that strategic investors remain active buyers and sellers across the food and ag value chain.

“We have a significant amount of interaction with the strategics in our space,” said Schwartz. “Their interest in specific assets and segments, ebbs and flows. Their activity on the buy side and sell side ebbs and flows and we’ve worked with them in both capacities.”