Ara Partners, a Houston-based private equity firm focusing on industrial decarbonization investments, is announcing later this morning the acquisition of Genera Energy, a maker of non-wood, agricultural pulp-and-molded-fiber products used for packaging. PE Hub caught up with Ara managing partner Troy Thacker to learn more about how this deal represents the firm’s investment strategy and how it plans to grow Genera.
Genera’s products, such as food packaging for take-out meals in restaurants, are made from agricultural fiber that is purpose-grown by farmers typically on non-productive land (typically land that is not used to grow food).
“Often, we do thematic investing,” explained Thacker. “We pick themes that are in alignment with our decarbonization focus.” With the Genera platform, Thacker said the fiber packaging material is more sustainable than single-use plastic packaging material without adding too much to the cost.
“It’s better for the planet, but it also is cost-competitive,” Thacker said. “When you get those two things right, you can take market share very aggressively and very rapidly, and that is the core of our investment thesis here.”
Thacker said that Ara Partners has been evaluating the sector for over the last two years and observed a trend whereby customers are demanding that restaurants, chains and consumer-packaged-goods companies pay more attention to the packaging that they use.
“Companies are increasingly setting waste and plastic reduction goals for themselves, and packaging is a very visible way to demonstrate those efforts to the market and customers,” said Thacker. This comes at a time when states in the US are also doubling down on reducing plastic usage in a bid to save the environment.
Ara Partners said it will be deploying numerous strategies to grow Genera, initially by adding a substantial amount of equipment to the current site in Vonore, Tennessee, which is the largest vertically integrated, non-wood, agricultural pulp-and-molded-fiber manufacturing facility operating in North America today, according to Ara.
The firm is committing an additional $200 million of capital to support significant expansion, including more integrated molded-fiber plants across the country to scale the production.
This will help create employment, especially in rural areas, through the production of raw materials and the manufacturing process of these packaging materials, Thacker said.
The firm is also riding on the onshoring trend, whereby some companies in North America are trying to open local lines of supply to reduce their reliance on foreign procurement and avoid shortages. Among other sectors, some of these shortages affected schools, sending procurement officers scrambling on the spot market to fulfill dining timetables.
“When you think of this product, you want to have access to it quickly and not wait on the ability to ship it from China or from the Far East, so bringing it back to domestic production makes a lot of sense for many of the customers that we serve,” Thacker said. “Not having incremental shipping costs and carbon emissions associated with transport are all critically important.”
“People want to move away from single-use plastics. They want to move to a more sustainable solution,” he said.