Roc Partners raising AUD 300m fund for agriculture and food deals – Partner

23 December 2020

Roc Partners, an Australia-based alternative investment management firm, is seeking to raise AUD 300m (USD 226.4m) in a private equity fund to invest in agriculture and food businesses, Partner at the firm, Brad Mytton said.

Roc Partners, an Australia-based alternative investment management firm, is seeking to raise AUD 300m (USD 226.4m) in a private equity fund to invest in agriculture and food businesses, Partner at the firm, Brad Mytton said.

 

The Sydney-based investment firm has already secured AUD 25m in the first close of Roc Premium Food Fund, which was launched in August but was disturbed by the COVID-19 outbreak earlier this year, Mytton said. The company will seek a second close in March next year, which might be followed by a third close if needed, he added.

 

Roc Premium Food Fund allows smaller institutions, family offices, and high net worth individuals to invest and then get exposure to the agriculture and food sector, he said. So far, Roc Partners’ previous acquisitions or “prefund deals” in this sector have been funded out of separately managed accounts on behalf of super accounts or raised on a deal-by-deal basis, the Partner said.

 

Roc Partners is not working with a placement agent and instead has an internal sales distribution and investor relations team that engages with placement agents internationally, he said. The firm is talking with investors in Japan, South Korea, Hong Kong, and South East Asia, Mytton added.

 

Roc Partners has “a good coverage” in Australia and expects a majority of investors to be local, he noted.   

 

Opportunities in the sector 

 

With the world’s population increasing, the climate getting more volatile, and food production being corporatized, the agriculture and food sector needs more investment to produce food in Australia at a large scale and then to supply other markets, Mytton said.

 

Australia’s agricultural sector will see investment and consolidation activities increasing as the low interest rate environment is driving appetite for agriculture assets and the coronavirus pandemic has also highlighted food security around the world, according to an analysis by Mergermarket earlier this month. 

 

Roc Premium Food Fund is looking for vertically integrated food businesses in Australia and New Zealand that own premium, branded products and are not solely reliant on local supermarkets, Mytton said. Ideally, those businesses would have an offshore distribution, the Partner said, noting that Roc Partners has experience taking products offshore through its previous investments, pointing to Capilano and Stone Axe Pastoral Company that export offshore.

 

Australia-based tomato grower Flavorite, dairy business Made by Cow, and stone fruit business 555 Superfoods, are the first batch of investments the fund has made, the Partner said.

 

Fund flexibilities 

 

The fund is following two types of investment strategies depending on whether the investment is in food or agriculture, he said. The food-focused private equity is seeking less capital-intensive assets with a return target of 20% IRR, while “agri infrastructure” investment offers a lower return of some 12% to 14% percent for more capital-intensive businesses, he said.

 

The fund will look at deals with an enterprise value of anywhere between AUD 50m to AUD 150m, he said. A cheque size is usually around AUD 25m to AUD 30m but Roc Partners will likely co-invest with other parties where appropriate since there is plenty of interest for co-investment, he said. Some of the firm’s investments are north of AUD 100m in equity, he added.

 

When it comes to debt funding, the firm is traditionally looking at 35% to 40% in terms of loan to value ratio for asset-heavy acquisitions, while for less asset-intensive businesses – around 2x EBITDA, Mytton said.

 

Roc Premium Food Fund will follow the traditional PE investment horizon of three to five years but is flexible to hold assets for longer when required, Mytton said.

 

Team of experts 

 

Different to traditional generalist PE firms, Roc Partners has deep expertise in working with agricultural and food businesses, Mytton said. This sector-specific expertise is then combined with wider private equity investment and value-adding skills, he added.

 

Mytton led a team of 12, focusing on agri and food investments as well as deal origination, he said. Prior to Roc Partners, Mytton was working for Macquarie Group, advising superfunds on private equity deals in the UK and California.

 

Roc Partners was spun out of Macquarie in 2014 and currently has AUD 7bn in assets under management, he said.

 

Over the years, the firm has worked with a range of law firms including MinterEllison, Gilbert + Tobin, and Clayton Utz, he said.

 

The firm has offices in Sydney, Melbourne, Hong Kong, and Shanghai, he said.