By Lynda Kiernan

Multi-boutique asset management firm Pacific Current Group (PAC) has acquired a minority stake in natural resource-focused  private equity firm Proterra Investment Partners. 

Proterra was spun-off from Cargill’s Black River Asset Management in 2016 as part of a three-way split initiated the previous September. On September 28, 2015 Cargill announced it was splitting Black River into three companies under a planned restructure aimed at making itself lighter on its feet and more able to quickly respond to a fluctuating commodities market. 

Of the three planned companies, Proterra was the largest with 49 employees, and today, manages more than $3 billion across its investment platform focused on agriculture, food, metals, and mining from its  offices in Minneapolis, London, Mumbai, Sao Paulo, Singapore, Shanghai, and Sydney.

“We are thrilled to be partnering with PAC,” said Rich Gammill, co-founder, Proterra. “Since completing our spin out from Cargill, we have established Proterra as a leading natural resources focused private equity firm.”

Historically, the firm’s strategy had kept it centered on emerging markets, with half of its total AUM invested in China, Indonesia, India, Thailand, and the Philippines, however, has expanded to offer U.S.-centric funds as well. 

“Over the last 10 to 15 years we’ve seen – especially in emerging Asia and countries like China, India, and most in Southeast Asia – increased professionalism where families and farmers are handling more corporate-like activities,” Tai Lin, a managing director at Proterra Investment Partners, told GAI News in an interview in February of this year. 

“We believe the reason this is happening is the growth of population and demand, which in turn makes for larger companies that ultimately need a way to operate in a more structured manner. Further, the market is becoming more sophisticated as is the consumer, and agribusinesses are faced with a more competitive environment.”

Reflecting this confidence, Proterra gained notice in 2017 when it invested a substantial $100 million in Indonesia’s FKS Food & Agri, a key part of southeast Asian holding company FKS Group,  in exchange for a minority stake in the company.

“As far as the investment of FKS in Indonesia, it was relatively big for the country and the sector,” Lin told GAI News. “If you think about Indonesia – where most studies predict it will be the fourth largest economy in the world very soon – we are seeing a ‘curious’ situation. Curious in that it is a country that is huge – 268 million people – and it has many natural resources such as oil, gas, copper, gold and more, but for ecological reasons doesn’t have the ability to produce enough of its own food. FKS is the company who has leading market positions in origination, logistics, import handling, and distribution of most food commodities – soybeans, soymeal, sugar. It is the only company with a nationwide footprint of warehouses, providing, in our opinion, the best platform for the Indonesian supply and demand deficit for food and agri.”

It was this deep understanding of the market on the part of Proterra’s leadership team that was one of the factors that attracted PAC to the deal.

“We were attracted to Proterra because of the quality of its investment team, its entrepreneurial culture, diversified business, and its commitment to ESG principles within its investment processes,” said Paul Greenwood, CEO and CIO, PAC. “We talk a lot about investing in growing market segments and Proterra is a great example of this.”

As part of its buy-in, PAC will make an initial investment in Proterra of $20.5 million, according to the terms of the agreement, which also includes earn out provisions that could see Proterra receiving future considerations of up to another $9.5 million. In exchange, PAC will receive 8 percent of Proterra management fees, and once FCA approval is secured, 16 percent of the value attributable to the firm’s management fees. On a run-rate basis, PAC expects that Proterra would have contributed about 12.5 percent of additional earnings to PAC’s underlying net profit before tax for FY 2019, according to a recent statement.

“PAC’s investment provides Proterra with balance sheet capital to continue to develop our strong investment management platform,” said Gammill. “We also believe PAC can provide important contributions as a new strategic partner for the firm.”

 

– 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.