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Latin America Agribusiness: Distressed Assets Fund (the "Fund") is a newly formed, private equity investment fund that
will invest in agribusiness companies in financial distress. The Fund will be established to purchase and manage eligible distressed assets. Upon completion of a restructuring, the Fund will divest
itself of the assets in the form of strategic sales as well as liquidations of portions of the original assets. Profits derived from these sales will be returned to the Fund for subsequent equity investment
and distributions to Principals.
The Principals believe that the Partnership will be able to make investments in Latin American Agribusiness
distressed companies on attractive terms, and that these companies have excellent prospects for future growth and profitability, as a result of the macroeconomic, agribusiness industry, and country-specific
factors delineated below.
The Partnership will focus on agribusiness companies with the following characteristics:
- privately-owned;
- net asset values of approximately US$50 million;
- in financial distress ;
- recognized products and/or even some brand equity; and
- high actual or potential export capabilities and track record.
Although the region of focus is Latin America as a whole, the prime targets will be Argentina and Brazil, which currently offer attractive investment
opportunities in the agribusiness industry:
- Large economies in turmoil; disruption could have redounding effects throughout western hemisphere; conversely, recovery could be engine of growth for whole continent;
- among the most efficient and advanced agricultural economies in Latin America;
- combination of internal food/feed requirements and high export capacities;
- many competitive companies in liquidity squeeze; and
- investor opportunities from heavily discounted asset values and mismanaged portfolios of institutional investors reflecting earlier investments at over-inflated multiples.
Agribusiness in the region is well positioned to take advantage of the structural changes that have already occurred and are now underway in a majority of
Latin American countries. Many companies, a majority of which are privately owned, have already completed modernization programs during the 1990s. In addition, Latin America (especially Argentina and
Brazil) holds a competitive advantage in global agribusiness sector and is now outperforming all other industries in Latin America.
Argentine and Brazilian agribusinesses offer high export ratios combined
with well established internal and regional distribution networks. Many of the companies in the region have introduced state of the art technologies for production, post harvest, processing and information
system management. There is also an increasing acceptance of GMO production in several Latin American countries with Argentina ranking second in the world to acreage devoted to GMO production. Both
Argentina and Brazil have well developed infrastructures for the handling, storage, and distribution of product.
The high export ratios of Latin American agribusiness are secured, in part, because of their
counter-seasonal production cycles vis-ŕ-vis production in U.S., Canada, Europe and Japan. The seasonal advantage offers special opportunities for establishing strategic alliances with other origin suppliers and
facilitates the establishment of market share worldwide. Under the present climate of political instability and economic downturn, investors can take advantage of the agribusiness export niche in Latin
America to hedge their exposure and hence, minimize the risk to their investment position.
Combined with this positive outlook for the agribusiness sector in the region, it coexists now a dramatic economic
downturn, particularly in Argentina and to a lesser extent in Brazil, that presents opportunities to restructure many local agribusiness companies. Although the commodities based industries are riding an
export crest induced by realignment of domestic currencies in both Argentina and Brazil, there remain structural impediments –failure of domestic financial systems to provide adequate financing, lack of experience
of local management to target export markets, etc.– which impede the maximization of these present growth opportunities.
It is in this environment that the Fund seeks to leverage Latin American
agribusiness comparative advantage by taking the advantage of access to international strategic investors and export markets. For the foreign investor, there are a number of good companies, with artificially
low asset valuations at this point in time, that will benefit greatly from an injection of private equity capital offered by the Fund, which will allow for the necessary financial restructuring in order to seize
the market opportunities. In summary, the Principals believe that an investment in the Partnership presents an attractive opportunity to investors for the following reasons:
- Mid-cap Latin American agribusiness companies in financial distress
- High debt discount ratios
- High NAV discount ratios
- International financial institutions pressure for corporate restructurings
- Exchange rate bias in favor of ag exports from Latin America
- Financial/Investment community interest in distressed asset opportunities
- Strategic timing for a distressed asset launch
For this purpose, the manager of the Partnership is seeking to secure approximately US$60 million in capital commitments from qualified investors. A
first closing might be done at US$20 million at the discretion of the General Partner.The Partnership expects to make investments of approximately US$5-10 million in size in companies that have strong growth
potential and are led by experienced management, but need to undertake a financial restructuring to improve their capital structures, and be positioned to seize growth and existing market opportunities. The
Partnership will make influential minority investments (with supermajority rights) or take controlling positions in the companies in which it invests. The Partnership will seek to protect and manage its
investments and guide company management by means of shareholder agreements, board representation, and other shareholder governance rights.
The Partnership and its investment manager, Latin America Agribusiness
Capital Partners, L.P., are sponsored by The GIC Group and Latin America Enterprise Fund Managers (LAEF), who contribute their respective strengths in cross-border Latin America investing and private equity
transactions. The principals of the manager are Dr. Richard Gilmore, Pedro-Pablo Kuczynski, and Nicholas Emmack. The Principals as a group have proven abilities in sourcing and
executing successful private equity transactions in Latin America, in management and finance, and in sponsoring and managing cross-border private equity investment. The GIC Group has almost 25 years of worldwide
consulting and transaction experience in agribusiness, including numerous acquisition and investment advisory transactions in Latin America. GIC has worked on project development and finance worldwide, with
extensive experience in emerging markets. GIC's staff has expertise in agribusiness research, analysis, and marketing, due diligence, project finance, and acquisitions. LAEF manages US$420 million in
two private equity funds, and has been a leading private equity investor in the region for the past six years. It has offices in Brazil, Argentina, and Mexico. The majority of LAEF staff is from Latin
America with multinational investment banking experience. |
