Pacific Ag Raises $7M from Advantage Capital Agribusiness Partners

PacificAgWith 3 acquisitions, the biomass consolidation czars consolidate as markets expand.

Funding will enable company to expand biomass supply chain services across U.S.

In Oregon, Pacific Ag has received a $7M investment from Advantage Capital Agribusiness Partners, a $154.5-million fund, licensed as a Rural Business Investment Company by the U.S. Department of Agriculture, focusing on businesses involved in the production, processing and supply of agricultural products.

The growth capital will enable Pacific Ag “to accelerate the expansion of its operations across the country through acquisitions, technology, equipment, sales and marketing to meet the increasing demand for agricultural biomass in the bio-refining, animal protein, composting and other markets,” the company advised.

More Background on the Story

PacificAg: The Digest’s 8-Slide Guide

PacificAg: The Digest’s 2015 5-Minute Guide

Who is Advantage?

Advantage Capital Agribusiness Partners is a partnership between Advantage Capital Partners and nine Farm Credit organizations. The Farm Credit System is a nationwide network of banks and lending institutions federally chartered to serve agriculture and the U.S. rural economy.

Three acquisitions announced

Alongside the investment, Pacific Ag also announced three industry acquisitions that will result in growth of 40,000 acres harvested in the Pacific Northwest with corresponding growth in volume under sales contracts.  The growth represents a 40 percent increase for Pacific Ag in the Pacific Northwest and 25 percent overall. PAcific Ag CEO Bill Levy also tipped to The Digest that a fourth acquisition was pending.

“It clearly says there is confidence in biomass and supply chain,” PacificAg CEO Bill Levy told The Digest. “it validates what we do in the marketplace.”

We’ve come a long way from being just a Pacific Northwest company. We can fund a lot of expansion, but we needed outside investment dollars to spur it. It’s about acquisitions. This money is to finalize the three acquisitions we made and a 4th under LOI.

These are smaller companies, focused contracting growers and harvesting biomass. In most cases we have been working side by side geographically. They see what we’re doing and the platform we are building. And they see the capital intensity in what we do.

When we look at acquisitions. In some cases we like to add the management team and that’s our preference — great reputations and been in business. What we offer is a an equipment and technology platform with PowerStock Pro, that allows them to get access to growth opportunities – they are great operators, and they want to grow and don’t want the front office hassle.

The Markets

These acquisitions are not about playing defense, and consolidating the industry to achieve economies of scale. “With these acquisitions we are definitely playing offense,” Levy said. “We’re bullish on the feedstock is doing.

The secret? Diversificatino, Levy told us. Diversification into mushroom composting,erosion control, feed & forage and bioenergy — not only to balance sectors and hedge aganist sector slowdowns. But for the experience that transfers from one marlet to another. “We have a couple of decades of experience in pushing feedstocks around and working on particle size,” Levy noted. “We’re sharing knowledge on what we’ve learned.”

Delays with the RFS

We hear quite a bit about struggles with pre-treatment, which is not the same business as biomass aggregation, but they are adjacent in the supply chain. Are there lessons to be learned by bioenergy companies from feedstock aggregators by bringing them into the process earlier?

Yes, says Levy. “Abengoa was one case where we felt we could have added a lot of value had we engaged earlier. It’s been overly complicated compared to what we’ve seen.”

From all of those different markets – continued interest and increased demand — and trying to meet that demand and position ourselves for the next five years for sure. Even with the challenges with the RFS.

What about getting into the advisory business farther down the supply chain? Levy ruled that out. “We’re focused on feedstock and growers. It’s intentional for us not to get pulled into front end processing. But we are a great partner.”

Reactions from stakeholders

“The Rural Business Investment Company is a new and innovative way to encourage more private sector investment in rural America,” said Tom Vilsack, Secretary of the United States Department of Agriculture. “These efforts will help strengthen growing industries like bio-manufacturing, advanced energy production, local and regional food systems, 21st Century farming technologies and other emerging fields. We are excited to see this fund continue to support businesses like Pacific Ag and look forward to seeing more partnerships like this come to fruition in the coming months.”

“Pacific Ag is already the single largest harvester and marketer of crop residue and hay in the United States. This investment and our acquisitions will enable us to grow national market share and serve more customers in more regions,” said Pacific Ag Founder and CEO Bill Levy. “The market for agricultural residue is exploding, and with our long and successful heritage in partnering with growers and supplying global and domestic markets, we are positioned well to meet this new demand.”

“Pacific Ag is a perfect fit for our model, given their positive economic impact on the communities in which they operate,” said Tim Hassler, Principal at Advantage Capital Partners. “They’ve built a solid foundation of trust with their grower partners, a record of operational excellence and innovation which in turn enables them to grow and scale quickly. Given the growth in the industry, they are really the only company out there who can meet the demand.”

 

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