June 17, 2020

By Lynda Kiernan, Global AgInvesting Media

AgroFresh, a company dedicated to science-based and data-driven solutions to extend the freshness, and enhance the quality and shelf life of fresh produce, announced it has agreed to sell $150 million of preferred stock to an affiliate of Paine Schwartz Partners. 

“Through our global investments in fresh produce, Paine Schwartz has developed a long-standing thesis in post-harvest technology,” said Kevin Schwartz, CEO, Paine Schwartz. “We are excited to target new opportunities in the sector through this strategic investment in AgroFresh.”

For two decades, AgroFresh has been actively working to mitigate waste in the apple industry (both pre- and post-harvest) through its innovative ethylene management solution, cloud-enabled monitoring systems, and integrated fungicide systems.

Over the years the company has gone on to expand the touchpoints for its solutions into other fresh produce crops, from bananas to cherries, citrus fruits, avocados, kiwi, tomatoes, plums, and pears. 

Under the terms of the agreement the preferred stock initially represents 36 percent of AgroFresh’s outstanding common shares, and carries a 16 percent dividend with a minimum 8 percent payable in cash.

AgroFresh has also agreed to expand the size of its board to ten members with Paine Schwartz initially granted two seats. 

For AgroFresh this investment will enable the company to better position itself for its next phase of strategic growth, to diversify its initiatives, and strengthen its capital structure while deleveraging its balance sheet, bringing the company’s net debt-to-adjusted EBITDA ratio from 5.8X to 3.8X.

It also avails the company of Paine Schwartz’ expertise in the field of agriculture, noted Jordi Ferre, CEO of AgroFresh who said, “Paine Schwartz brings deep domain expertise within the agriculture sector, which we believe will complement our leadership team and Board composition. We are excited to welcome them to our team and look forward to their future contributions.”

“This investment provides several significant benefits to our shareholders and represents an important step toward achieving our goal of optimizing the Company’s capital structure and meaningfully deleveraging the balance sheet,” added Graham Miao, CFO, AgroFresh. “As we continue to improve the results of our operations, including cost optimization, this strategic equity investment will create further financial flexibility to generate growth.”

High Stakes

Solving issues associated with agricultural and food waste is becoming a more common theme among agtech and food tech startups and their investors, not only in the U.S., but in global markets, as the stakes of not doing so become increasingly critical.

Adam Bergman, managing director of EcoTech Capital, noted in his recent article, Earth Day 2020: COVID-19 Exposes Paradox of Simultaneous Food Shortages and Food Waste shared by GAI News in April, “According to the World Bank, by 2050, feeding a planet expected to have over 9 billion people will require an estimated 50 percent increase in agricultural production and a 15 percent increase in water withdrawals.”

Bergman goes on to state that according to ReFED, a nonprofit committed to reducing U.S. food waste, “…U.S. consumers, businesses, and farms spend $218 billion annually, or 1.3 percent of GDP, growing, processing, transporting, and disposing of food that is never eaten.”

COVID-19 has only compounded these issues. The closure of restaurants, schools, stadiums, cruise ships, and parks have significantly cut demand. Although consumers are still eating, the demand chains have shifted – and as retail supermarket suppliers scramble to keep up, those supplying large-scale clients in the hospitality industry have lost their market. Meanwhile, these rapidly changing supply chains are leaving farmers to have to dump milk and plow under tens of million of pounds of perishable crops. 

This new reality has sparked ReFED to announce the April 29 launch of the ReFED COVID-19 Food Waste Solutions Fund to rapidly deploy funding to organizations that can quickly scale solutions to reduce food waste and relieve hunger.

It has also generated greater investor focus on the potential for change and growth being seen in companies such as AgroFresh.

“Through our global investments in fresh produce, Paine Schwartz has developed a long-standing thesis in post-harvest technology,” said Kevin Schwartz. “We are excited to target new opportunities in the sector through this strategic investment in AgroFresh. AgroFresh is a leading independent platform that has a diversified network of direct customer relationships, a solutions-based service offering and a leading post-harvest portfolio. We look forward to working closely with Jordi, Graham and the team to enhance operations, drive growth and create value.”

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.