Investors offer capital and strategic support
Equilibrium Capital taking a share in the American Houweling's Group, HAL Investments joining the Dutch Prins Group and Stolze and NPM Capital investing in Europe's largest tomato producer Agro Care. In recent years, reports about investments in horticulture have followed each other rapidly. The horticultural sector is hot and (Private Equity) investment companies are increasingly turning to producers, greenhouse builders and suppliers. But these horticultural companies themselves are also increasingly looking for investors who can help them realize their international growth ambitions.
Growing demand for local food
The Netherlands is a global leader when it comes to horticulture and seeds for plants, in terms of production, trade and innovation. To maintain this leading position, the Topsector Horticulture & Starting Materials (Topsector T&U) has established a cluster in which industry, research and government work together to tackle the challenges horticulture is facing. The Topsector T&U stimulates, among other things, innovation and collaboration between parties in order for them to remain internationally significant and to contribute to the Sustainable Developments Goals. According to Gert Stiekema, secretary and director international strategy at the Topsector T&U, horticulture production is also interesting for investors because of the growing worldwide demand for local food production “As a result, high-tech greenhouse companies have increased in scale in recent decades. International greenhouse projects in, for example, the United States and China have become considerably larger and partly because of this more interesting for investors.”
In the past ten years, there has indeed been a strong growth in greenhouse horticulture. Worldwide, the acreage currently amounts to about 600,000 hectares. About 500,000 hectares are intended for fruit and vegetables, 100,000 hectares are used for the cultivation of flowers and plants. More than 90 percent concerns foil greenhouses and slightly less than 10 percent glass. The growth of the horticultural area is expected to continue in the coming years, accompanied by investments in technological innovations. To make that happen, companies need capital and that's where investment companies come in.
Minority and majority interests
One of those investors is NPM Capital. The investment focus of NPM Capital is primarily on the long term and aims at helping companies to grow into the next development phase in both scale and professionalism, says Managing Director Rutger Ruigrok. “We want to actively support companies, in fact, the way Private Equity works, but by building a relationship with the entrepreneur. Working with entrepreneurs is very much in our DNA. We are open to both minority and majority interests. However, if we take a minority interest, it has to be a significant interest, so that we really sit at the table as a partner.”
NPM Capital defined four investment themes: 'Everything is Digital', 'Future of Energy', 'Healthy Life and Learning' and 'Feeding the World'. “Because we find it important to have knowledge of those sectors, we involve experts in this. By focusing on the various sectors and knowing more about them, we can value the companies.” Between 2005 and 2012, NPM Capital invested heavily in the food sector, with large companies such as Continental Bakeries, Van Dobben/Kwekkeboom and HAK Vegetables. “Mainly mid-chain companies. Now we want to move more towards the front of the chain, towards the companies where the technology is located. For example, we have invested in Ploeger Oxbo, which develops harvesting machines, and Kramp, Europe’s largest online marketplace for spare parts, agricultural related products and accessories for farmers and growers.” The first real investment in greenhouse horticulture took place about two years ago, with a minority interest in Agro Care, Europe's largest tomato grower. “When it comes to growing products, scale is extremely important to stand up to retailers and to invest further in technology. The aim with Agro Care is to quadruple the acreage in the coming years by building new greenhouses and acquisitions.”
Consolidation in horticulture
In recent years, NPM Capital spoke with many parties in the Westland region in the Netherlands, Ruigrok says. “That has not yet led to new investments, but the intention is there. Dutch horticulture has many beautiful leading companies in the field of technology, which compete with each other all over the world. Until recently, they seemed to see no need to merge. What we notice, however, is that there seems to be an increasing willingness to give shape to this consolidation. I think we could be a great catalyst to get that consolidation going. Partly with the capital that is needed for this, but also by being a partner for those companies in the long term.” According to Ruigrok, long-term thinking is an advantage that NPM Capital offers. “We do not have a predefined exit, so we can exit after three years, but that can also be after thirty years. The food & agri sector has to deal with cycles, for example, due to viruses or due to commodity prices going up and down. We can deal with that better than short-term investors can.”
Just as 'Feeding the World' is a strategic theme for NPM Capital, this is also the case for the Topsector T&U, says Stiekema. “Currently half the global population suffers from various forms of malnutrition. Affordable and healthy food is high on the agenda of the United Nations and is a basic necessity of life. Shortages may cause social unrest, as we saw during the start of the corona pandemic.” That is why, in his opinion, it is important that there is increasing cooperation between parties including private sector, to guarantee the production of enough food.
He understands that investors choose to invest in horticulture. “With high-tech greenhouse horticulture, an investor expects to achieve a good return and run fewer risks, because cultivation is manageable and less dependent on climate conditions than open field production. The use of new technologies, such as sensors and the use of data, will further improve this manageability in the coming years. The Netherlands is known as the nursery for new developments due to the strong knowledge ecosystem and the high level of technology and cultivation. Dutch greenhouse builders, plant breeders, knowledge suppliers and technology companies are active worldwide and can provide a total package, including training local people, for the design and management of large projects. Investors are very interested in cooperation with those companies because they can make the development of those projects possible.”
Ruigrok notices that horticultural companies are indeed able to find NPM Capital more easily, partly due to the investment in Agro Care, which received a lot of attention. “We are now better known as an investor in the sector, but companies themselves are also thinking more actively about their future. There is a shift going on in horticulture and in the end, they want to keep on playing a significant role themselves. Also, there are more investors active in horticulture and there were several takeovers already. Because of that, entrepreneurs start thinking more seriously about collaborating with other parties. Moreover, the fact that more investors are focusing on horticulture is a positive thing for the sector as a whole.”
Supporting the management
According to Ruigrok, it is important that an investor provides added value to the companies in which it invests. “By being a strategic sparring partner, we can help companies take the next step in their development. Trust is very important here.” NPM Capital, therefore, does not want to replace the management. “We want to be an active shareholder that supports the management where necessary on strategy and financing issues. If you choose to do business with each other, it is good to express expectations in advance. That way, you both know what you're getting into."
The Netherlands has the ambition to play an international role in the development of sustainable Food Systems via international cooperation in agricultural and horticultural chains. Public-private partnership is essential in this regard, says Stiekema from the Topsector T&U. He points at the 'Farming the Future' project. “Farming the Future is an international campaign, devised jointly by the Dutch public and private sector, to fast track the global transition towards a sustainable agriculture. With the advanced knowledge of the Dutch agri-food, horticulture, and fishery sectors, the Netherlands can support potential partners in developing befitting sustainable and smart solutions, locally and globally. Food security can only be achieved through a strong partnership between governments, businesses, research institutions and citizens. Let’s roll up our sleeves and inspire the world how, together, we could farm a sustainable future.”
International webinars "A one stop solution to feed the world"
In a series of three webinars, various parties active in international greenhouse horticulture, including the Topsector T&U and GreenTech, want to show how co-creation can be realized for a future-proof food & flower industry. This webinar series is intended for national and international policy makers, licensing authorities and subsidy providers who stimulate investments in agri-food and investors in horticulture. The webinar series is entirely in English. The first two parts have already taken place, the last session will be on July 13. Watch the webinars via https://worldhortievents.nl/ecosystem/ or register for free to participate in the last webinar.
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