Pinnacle Agriculture Holdings, a multifaceted agricultural retail distribution business built through acquisitions and greenfield establishments, announced it has successfully undertaken a recapitalization under which the company’s creditors have agreed to extend the due dates on a first-lien term loan, and on second-priority senior secured notes.
The group also has announced the infusion of $125 million in fresh capital into Pinnacle Agriculture Enterprises LLC, provided by funds affiliated with Apollo Global Management, members of the Pinnacle management team, existing creditors, and additional unnamed new investors.
The plan is expected to reduce Pinnacle’s debt load by approximately $200 million, and reduce its annual costs associated with debt servicing by more than $5 million.
“We believe that the new capital investment, of over $125 million, demonstrates the confidence that our creditors and shareholders have in Pinnacle’s business plan and also positions Pinnacle to drive long-term value for all of the company’s key constituents, including its employees, customers and investors,” said Kenny Cordell, Pinnacle’s president and chief executive, who added, “Additionally, our management team is also investing new capital of approximately $1 million alongside the other investors.”
Headquartered in Loveland, Colorado, Pinnacle has historically acquired well-positioned agriculture retail and wholesale businesses to build a portfolio of brands that includes Sanders®, Providence Agriculture™, Performance Agriculture™, AgOne Application Services™, OptiGro®, Innvictis™, and Meridian Agriculture Distribution™. Through these channels, the company is active in seed production and sales, agri-chemical distribution, bulk handling of fertilizers, precision ag services, and merchandizing for the farming, livestock production, and wildlife sectors. The company also provides cutting edge crop protection, seed, adjuvant, and plant nutrition technology through its relationships with leading R&D and generic suppliers, according to the company website.
Not Surprising
The need by Pinnacle to recapitalize debt and to secure capital is not surprising given the recent pressure on the agricultural inputs and seeds sector, where consolidation and M&A’s have been the name of the game in the face of a multi-year slump in commodity prices.
In the last quarter of 2015, Monsanto CEO Hugh Grant stated that consolidation in the agriculture sector was ‘inevitable’, and indeed, market difficulties have pushed many seed and ag chem players to seek out deals that would enhance their position, or provide them an exit from the market.
Most recently, in December 2016, H.J. Baker & Bro., Inc. sold Tiger Sul Products, a global provider of Sulphur fertilizers and crop performance chemicals, to Platte River Equity and members of Tiger-Sul’s management team for an undisclosed amount. The deal for Tiger-Sul was made through a commitment of capital through Platte River’s third fund, Platte River Equity III L.P, which closed in 2012 at a hard cap of $405 million.
The Tiger-Sul deal however, was only the latest in a year that saw a string of high-profile mergers and acquisitions in the agricultural chemical and seed sector.
One day after the announcement of the Tiger-Sul acquisition, Monsanto announced that its shareholders overwhelmingly voted to approve the company’s pending $66 billion acquisition by Bayer AG.
Other recent deals within the ag chem space include a $130 billion all stock, 50/50 mega-merger between Dow Chemical and DuPont that would form DowDuPont – a chemical company that would be second in the world only to BASF; ChemChina’s $43 billion all cash takeover bid for Syngenta AG; the acquisition of Denmark’s Cheminova by FMC Corp for $1.8 billion in cash, and Lariat Partner’s acquisition of a stake in generic crop protection company, Willowood USA, in exchange for a “significant investment.”
Additionally, after an announcement by Canada’s Agrium Inc. and Potash Corp. in August of last year that the two companies were engaged in talks over a merger of equals that would create an agribusiness giant valued at more than C$30 billion, shareholders of both companies overwhelmingly voted their approval of the deal in November.
-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