Tobacco leaf supplier Universal Corporation’s acquisition of FruitSmart, an agribusiness based in Washington state, has come amid increasing private equity interest in the state’s ag sector, according to an investment bank that advised on the deal.
An advisor to FruitSmart in the November deal, Cascadia Capital senior vice-president Scott Porter told Agri Investor it had attracted interest from corporations, private equity funds, and endowments. Washington is seen by some as the “new California”, he added, offering favorable land costs, water rights and opportunities in organic and conventional crops.
“We’re seeing more and more interest from asset-management firms who are now going direct, pension funds that are now going direct,” said Porter. “All of these guys have signaled to us that they are interested in, not just the growing, but also the midstream processing. On top of that, you have increasing family office capital that is interested in agricultural assets and midstream.”
Financial details for Universal Corporation’s acquisition were undisclosed. Regulatory filings showed FruitSmart’s owners were paid $80 million for the company’s capital stock, with an additional $25 million payable depending on the achievement of financial targets for 2020 and 2021.
FruitSmart was founded in 1982 and processes apples, grapes, cherries and other crops into juices, concentrates, fibers and other products. The company has customers in the US and international markets, which are serviced from two processing facilities FruitSmart maintains: a 128,000 square foot processing facility in Grandview and a 335,000 square foot facility in the city of Prosser.
Porter said that for Universal Corporation, diversification from tobacco comes, at least in part, at the suggestion of an activist investor. The FruitSmart acquisition was designed to build on the company’s midstream experience working with tobacco farmers and to complement Carolina Innovative Food Ingredients, an ingredients unit Universal launched in 2014.
Cascadia Capital chairman and chief executive Michael Butler said FruitSmart’s sale reflects an acceleration of the Pacific Northwest tree fruit sector’s transformation from a cottage industry dominated by families to one he thinks will be predominantly owned by institutional investors within five years.
As a result of the shift, Butler said growers like FruitSmart, which have traditionally focused on one crop category, were increasingly likely to be supplying large retailers that demand year-round supplies of multiple fruits.
One benefit of the increased pace of investment, Butler said, was its potential to address the constraints imposed by the supply of ag-qualified management personnel in the region.
“As you get more and more of this capital coming in, it’s going to be easier to recruit really high-quality management people because they will say: ‘Well, if it doesn’t work out at this company, I can walk down the street to company BCD because they are well-capitalized, they’re growing and they are going to need management too’,” said Butler.
“You are starting to see the beginning of an ecosystem that will propel the Northwest ag sector forward.”