Tue, Jun 27, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Private Equity Strategies

Dealmaker Q&A: Valiance Advisors Partners With SLC Land Co. for Major Brazilian Agriculture Effort

Thursday, December 20, 2012

In a +$400m partnership, London-based Valiance Advisors and Brazil-based SLC Agricola aim to meet the demands of peak food.

By: Bailey McCann
Private Equity Strategies

One of the core initiatives of the Brazilian government, and indeed Brazilian landholders is to make the country the new agricultural hub for the world. Brazil currently ranks #1 in exports of beef, chicken, and coffee, and is on pace to overtake the US in soybean production if not corn very soon. Despite this leadership role, the government and many new investors have been active in pushing the boundaries of yield and potential farmland in an effort to ramp up production.

SLC Agricola is one of these leaders. The company is Brazil's agriculture benchmark and one of the largest listed farmland operators globally - it went public in 2007. Current market cap for SLC Agricola stands at approximately $1bn. SLC Agricola has been operating in agribusiness for 67 years, including a 20-year joint venture with John Deere.

The amount of land SLC Agricola owns and operates is 308,500 hectares, which is a land area 20% larger than the country of Luxembourg. Given this dossier, Valiance, keyed in on SLC and Brazil when it began looking for agriculture opportunities. Valiance, founded in 2007 is a London-based asset manager focused on real asset and special opportunity investing.

"We have been focused on agriculture since 2008, and looking at the opportunities landscape, Brazil is a big standout to buy and operate farms in," Mark McLornan, Head of Agribusiness at Valiance, says in an interview with Private Equity Strategies. Agriculture accounts for nearly half of the Brazilian economy and almost 40% of its jobs. The country's corn exports recently provided a critical backstop against the lasting drought in the US Great Plains region, a reality which only added to the sense of urgency Brazil's agribusiness leaders feel to keep production high.

Under the terms of the over $400m partnership, SLC Agricola will have 50.6% and will be responsible for much of the operational heavy lifting. Valiance will have 49.4% drawing revenue on the land. McLornan is quick to point out that the partnership is all about action, both firms have already made significant moves this year and will continue into 2013.

"To date our partnership is capitalized at $300m, with $180m more to be invested over the course of 2013. We currently own three large farms and are in the process of acquiring three more," he says.

The process involved around taking these acquisitions from raw land to a functioning farm will take approximately three years. That includes all the logistics of permitting, making the land ready for farming, and planting - the real work in agribusiness. However, the returns on this work are notable - over the last ten years Brazilian farmland has an appreciation of approximately 12%.

More than just purchasing more land, the key differentiator for Valiance was SLC's focus on sustainable farming models.‚  McLornan explains that in addition to adding acreage, SLC uses new agriculture technology to improve yield and reduce environmental footprint. Brazil has been the source of international scrutiny over how it balances the demands of its agribusiness economy against fragile local ecosystems like the rainforest. McLornan, points out that Brazil has some of the strictest enforcement on land use and environmental impact,‚ in large part because the world is watching. Brazil requires 30% of any land purchased to remain in its original state.

"In 8 years, the world will need 100m more acres to meet agriculture demands, in European terms that's 3x the size of England.‚ Brazil has to increase its own productivity to meet that demand," he says, noting that what often gets lost in the conversation around large agricultural operations is the realities of global population and their food needs.

"The collapse in current grain stocks is missing from the conversation. People aren't realizing that these yearly population booms are already having a significant effect on grain stocks, that will only continue," McLornan says. "People talk a lot now about peak oil. They should be talking about peak food."

 
This article was published in Opalesque's Private Equity Strategies our monthly research update on the global private equity landscape including all sectors and market caps.
Private Equity Strategies
Private Equity Strategies
Private Equity Strategies


Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Legal - Bond market concerns could scuttle Paulson's Fannie-Freddie plan[more]

    From Bloomberg.com: A hedge fund proposal for freeing Fannie Mae and Freddie Mac from U.S. control is poised to face stiff opposition from investors who say it risks wrecking the mortgage-bond market. The Moelis & Co. blueprint, which firms including Paulson & Co. and Blackstone Group LP sponsored,

  2. Other Voices: Are your pricing policies and procedures for less liquid instruments adequate?[more]

    Komfie Manalo, Opalesque Asia: The unrelated position mismarking incidents that quickly precipitated the closures of both Visium Asset Management and Marinus Capital have been recent focal points for market participants, but regulatory scrutiny of valuation choices for less liquid instruments is

  3. FinTech - AI hedge fund Numerai now live on Ethereum, Cryptocurrency hedge funds generate huge returns as bitcoin surges[more]

    AI hedge fund Numerai now live on Ethereum From Cryptoninjas.net: Back in February, Numerai announced numeraire (NMR), a cryptographic token to incentivize a new kind of hedge fund built by a network of data scientists. Earlier today, the Numeraire smart contract was officially deployed

  4. Investing - Advisors slash hedge fund positions, Theravance Biopharma is a top pick of investment guru Seth Klarman, As asset management industry grows a search for new revenue streams[more]

    Advisors slash hedge fund positions From Barrons.com: Financial advisors have cut wealthy clients' exposure to hedge funds by up to one third over the past 12 months, The Financial Times reports. Advisor firms in the FT's annual top-300 ranking have reduced their hedge fund allocation to

  5. Investing - U.S. hedge fund in anonymous bet against Tesco shares, Hedge funds made repeated attempts to invest in Veneto banks, Steve Cohen's Point72 takes stake in struggling electronics retailer Conn's, Hedge fund Excalibur bets Riksbank will tighten by end of year[more]

    U.S. hedge fund in anonymous bet against Tesco shares From FT.com: A $20bn New York hedge fund is using an offshore shell company to anonymously bet against the shares of the UK supermarket Tesco, raising fresh questions over the efficacy of European short selling disclosure rules.