Agri-Vie Fund I, the Africa Food and Agribusiness Investment Fund managed by the pan-African private equity investment firm, EXEO Capital, has announced its exit from one of South Africa’s most well-established abalone farming companies, HIK Abalone Farm (HIK), concluding a rewarding partnership which has significantly expanded the business over eight years. The Agri-Vie interest was sold to African Pioneer Group, a black-owned investment company, with other interests in the fishing sector.
EXEO Capital partner, Izak Strauss, recalls that the decision to invest in HIK was based on a number of factors. “With the ocean’s natural resources coming under increasing pressure, we have long had a keen interest in investing in good, viable aquaculture projects. Established in 1998 in the Southern African coastal town of Hermanus, HIK was already a well-established company at the time of investment and had an excellent management team.
“Furthermore, most of their income was USD-based, which promised a good rand hedge for the fund,” Strauss adds.
This reasoning proved sound, based on the impressive return achieved by the fund upon exiting. “Over the eight-year investment term, we invested a total sum of R41.5mn in two tranches and achieved an excellent return that is in line with expectations for private equity investments,” says Strauss. “We were also able to enhance our knowledge of aquaculture business in our interaction with the company and industry. We expanded our network in the industry through building a strong relationship with management and fellow shareholders.”
Strauss believes that this interaction at board level and with management also contributed to HIK’s expansion as a business. “Over the eight-year investment term, we were able to assist the company in improving the evaluation of new investments and capital projects, as well as improve their financial reporting and corporate governance.” Peter Inglis, the Chairman of HIK for the past 20 years, added that the development of an abalone farm is highly
capital intensive during expansion phases, primarily because the revenue stream lags capital expenditure by a number of years, making organic growth very slow.
“Investment by Agri-Vie has enabled HIK to advance the expansion cycle by the development of a second farm, enabling production to increase from 80 tonnes per year to 300 tonnes per year. “We have derived a significant benefit from the association with Agri-Vie over the past six years, not only in terms of financial muscle but also in terms of financial management and reporting structures. HIK are now in a position to play a major role in the farmed abalone industry,” says Inglis.
While this exit brings to a close the partnership between EXEO Capital and HIK, Strauss says that aquaculture remains a focus area for current investments. “Just last year, our Agri-Vie Fund II concluded an investment into TerraSan – a fast-growing aquaculture company operating on the South and West coasts of South Africa. This is our second Agri-Vie Fund, building on the success of its predecessor US$100mn Fund.”
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