Sun Capital’s plan of action for its first agro-chemical investment

The investor sees big opportunity to transform fertilizer manufacturer Calcium Products with agtech, among other specialty tools and increased capacity.

Sun Capital Partners wants to combine newly acquired Calcium Products, a traditional manufacturer of soil fertilizers, with agtech businesses to provide more customizable solutions for farmers.

The Boca Raton, Florida, private equity firm has observed farmers’ growing interest in precision farming or site-specific crop management. It’s a concept that enables them to use modern technology to improve crop health.

“To manage a particular region of their farm, farmers are able to combine technology to get to the right place,” Jeremy Stone, managing director of the firm, told PE Hub.

Agtech deal activity has been steadily rising in North America, according to PitchBook data.

North America – the global leader in agtech dealmaking, both in terms of values and volumes – recorded $3.3 billion worth of investments across 182 deals as of Q3 2020. That  eclipses the $2.8 billion raised across a larger number of deals (234) in the entirety of 2019, reported sister publication Agri Investor.

Field analysis and monitoring is a growing field within the agtech space. “[A] lot of Silicon Valley tech is coming around monitoring,” Stone said.

Beyond agtech, Sun Capital will also look at smaller specialty micronutrient fertilizers and soil additives companies. The aim is to provide the farmer with all the tools under one platform. “Our products will be [then] placed to correct a soil deficiency,” he explained.

Sun Capital bought Calcium Products from its roughly seven-year owner, First Capital Partners, concluding a competitive auction with a deal that closed on New Year’s Eve.

The sale process managed by Piper Sandler (formerly Piper Jaffray) began last summer while an LOI was signed a few months later in November.

“The owners wanted to close by year end, so we delivered on a pretty tight time-frame,” Stone said. Sun Capital deployed capital from its $2.3 billion Fund VII, while the management team rolled equity in the transaction. Cerberus Business Finance provided debt financing on the acquisition.

The process commanded interest from both private equity and strategic buyers, according to a source. Lazard Middle Market served as the buyside advisor.

Founded in 1987 and headquartered in Ames, Iowa, Calcium Products is the first deal for Sun Capital in North America’s agriculture chemical space. That said, Sun Capital’s global portfolio includes an Austrian crop protection chemical manufacturer, ESIM Chemicals.

With over 20-plus years of experience investing in the chemicals space, Sun Capital has a value creation plan for the long-established business that focuses on agtech but doesn’t stop there.

“They [Calcium Products] are in need of a capacity expansion,” Stone said. The firm intends to build an additional facility in response to the high demand for the company’s pelletized version of fertilizers.

The platform will optimize its footprint in its home state of Iowa and continue supplying to Midwest farmers. “They will stick to row crops like soybean and wheat primarily grown in Midwestern states,” Stone said.

Moreover, there will be improvements made to the company’s marketing CRM systems, upgrades to the supply chain and a less likely adoption of e-commerce. “We are selling to farming intermediaries,” Stone explained. “It’s [e-commerce] an element that we would evaluate for our existing customers rather than farmers directly.”