Is Unigrains’ strategic-financial model a threat to PE?

Founded by France’s grain growers to promote their sub-sector, the firm remains something of a unique beast – for now.

A few months ago, we reported on a Chinese businessman’s discreet (some would say opaque) efforts to amass hectares of French cereal fields. The purpose of his campaign, observers told us at the time, was to make sure China had access to the flour it needs to satiate its rising appetite for bread.

Yet French grain farmers have long been striving to promote their trade themselves – they even built their own investment outfit some 55 years ago. Unigrains, which describes itself as a growth-capital investor, started off as an entity designed to procure export finance. Its latest investment, which will see it acquire the world’s largest maker of industrial baking equipment, shows how much of a hybrid beast it has since become: beyond selling grain, its backers are now seeking to export know-how and machinery.

Unigrains’ acquisition of Mecatherm differs from the approach usually taken by the group, which favors buying minority stakes. This does not mean the latter do not also follow a rationale that’s at least partly strategic. Domestically, its investments have often been aimed at bolstering France’s grain export supply chain. In January, for example, it backed the succession plan of Armbruster Group, a major player in the storage and transport of corn to Northern Europe. “It is important that the grain-growing industry can rely on strong, well-performing trader-stockers,” private equity investment officer Anabelle Gerbal told us then.

In recent years, the group has also nurtured international ambitions. This has largely been done through investing in funds or co-investing with local GPs. Unigrains is present in Spain, Brazil, Morocco and sub-Saharan Africa, through partnerships with MCH Private Equity, Aqua Capital, Agram Invest and Phatisa. It has also started building a direct investment platform in Northern Europe, after hiring an ex-TIAA executive last September. In Italy, it is sponsoring a dedicated agri fund, for which it is hoping to raise up to €70 million. For all these, financial returns are part of the expected reward. As executives at Unigrains told us last year, however, the aim is also to keep tabs on what’s happening in the agri-food industry at large – from technological innovation to consolidation trends.

Financial considerations must play an even bigger role in the third strand of Unigrains’ activity: fund management. Céréa Partenaire, its subsidiary, runs two equity funds, three mezzanine vehicles and a debt offering. Unigrains typically anchors these funds with up to 20 percent of the money collected. The group keeps an eye on the listed world as well, providing a quarterly index tracking the performance of Europe-listed agri stocks.

This blend of financial and strategic motives exists elsewhere: in a way, that’s also the approach followed by sovereign wealth funds. The difference here is that Unigrains is an entity backed by private funders. As an organization, that makes Unigrains rather rare. Few equivalents exist outside Europe, perhaps because the French agriculture supply chain is uniquely concentrated. It may also help that the region remains largely devoid of agri-food PE specialists. It’s unclear a group of this type could thrive in federal states or places where buyout groups already rule. That should shield the latter from a new form of competition.

In Europe, Unigrains’ expansion may even be a good omen for PE players, as it shows there’s enough happening in agribusiness to warrant a series of pooled vehicles. Some are starting to get inspired: last month, Italy’s DeA Capital Alternative Funds hit a first close on its debut ag vehicle at 80 percent of its €100 million target. The difficulty here might be finding enough LPs to support such strategies in Europe. Put the right assets in the mix, however, and there may be appetite further east.

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