March 2, 2017

Limoneira announced that it has agreed to acquire a 90 percent stake in Pan de Azucar S.A. (PDA) – a Chilean citrus producer with 210 acres of lemon and orange orchards near La Serena, Chile – and an equity interest in Rosales S.A., a citrus packing, marketing, and sales operation also located in La Serena, for $5.8 million in cash.

The acquisition, which was conducted through Limoneira’s wholly owned subsidiary, Limoneira Chile SpA, was completed on February 24. Under the terms of the deal Limoneira also assumed $1.7 million in long-term debt carried by PDA, and withheld 10 percent of the purchase proceeds for a period of six months to allow for potential contingencies. In addition to PDA’s total assets valued at approximately $5.5 million, Limoneira also will gain a total 48 percent stake in Rosales S.A. through the transaction, while the owner of the remaining 10 percent stake in PDA will own the remaining 52 percent.

Founded in 1959 by Don Edwardo Rosales Munizaga, and located in a key citrus and avocado growing region along Chile’s coast, Rosales is partnered with Limoneira through Limoneira’s  One World Citrus™ marketing scheme to pack and sell citrus fruit domestically in Chile and abroad.

“With its favorable climate for citrus, PDA’s productive orchards and strong relationship with Rosales was a perfect fit for our international expansion plans,” said Harold Edwards, president and chief executive of Limoneira. “Our acquisition of PDA is consistent with our long-term strategy to expand our agribusiness internationally as a global, year-round supplier of lemons complementing our One World of Citrus™ strategy.”

Founded in 1893 in Ventura County, California, Limoneira began producing lemons, Valencia oranges, and walnuts on 413 acres. Today the company has grown to 11,000 acres producing oranges, lemons, avocados, pistachios, pluots, cherries, and specialty citrus, and is one of the largest producers and suppliers of lemons and avocados in the U.S.

This deal for PDA is the latest for Limoneira, which has been pursuing a strategic plan of international expansion in order to provide global customers with citrus fruit on a year-round basis.

Expansion

In April of last year the company announced its expansion into South Africa with the launch of Limoneira South Africa though a partnership called Real Citrus with Re:inc which was launched to oversee packing and citrus sales on the African continent.

“Africa is one of the largest citrus exporting continents in the world – exports are almost four times larger than California’s and Arizona’s combined,” said Limoneira chief operating officer, Alex Teaugue upon the announcement. “This represents another promising opportunity for supplying our global customers year-round.”

“Working with Limoneira made perfect sense, said Riaan van Wyk, CEO of Re:inc. “Their 124-year history of growing high quality citrus for export is admirable as is their responsibility for sustainability. It will be exciting to harness our combined talents to benefit our customers.”

Despite having an eye overseas, Limoneira remained committed to growing its domestic business as well. Only four months prior to the launch of Limoneira South Africa, the company announced the acquisition of 757 acres of citrus orchards in California’s San Joaquin Valley for $15.1 million.

The acreage, which was comprised of lemon, orange, and specialty citrus orchards, was acquired through purchase options that were part of operating leases that Limoneria has had since 2012 on approximately 1,000 citrus acres, which the company referred to as the Sheldon Ranch leases.

The Big Squeeze

The lemon industry, overlooked for so long, is seeing a renaissance of sorts as demand climbs with consumers’ search for more intense flavors from healthy sources. Between 2015 and 2016 sales of lemons in the UK jumped by 16.9 percent, while in South Africa growers are planting lemon and mandarin orchards to keep pace with demand reports Fruit Net.

“Consumers tend to keep them in the fridge and don’t fear that they will go off,” notes Hazel Akehurst, business unit manager at Capespan UK.  “They are using them as an ingredient in dishes in winter and in salads and drinks in the summer.”

Global production of lemons and limes for the 2016/17 season is expected to see a 4 percent increase to top 7.3 million tons, according to the U.S. Department of Agriculture (USDA). Global exports are expected to be up by 3 percent, while U.S. imports are expected to be up by 25,000 tons due to tight supply.

“We’re really dealing with record level sales prices,” Limoneira CEO Howard Edwards told Forbes in an interview in 2014. “There’s a perfect storm that’s taking place right into a fortuitous demand driven by promotion of the health benefits of lemons and the great things they can provide.”

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com