Industry insights on the agricultural market
A shared investment in the agricultural market
Brise Group has signed an agreement with CEE Equity Partners Ltd for the development of the First Open Access Agriculture Infrastructure Platform in Romania. The fund will invest in modernizing and developing 15 grain silos belonging to Brise Group, which have been transferred into a purposely-structured Romanian company.
Following the transaction, Brise Group will focus on its other services: grain procurement, trading and inputs distribution. Brise Group is one of the largest and most diversified players in the cereal trading sector, offering a wide range of products and services, including cereal and inputs trading, production, storage capacity, auto and naval transportation, financing, retail and inputs distribution, and quality assurance. The firm has a solid structure created by a group of companies 100% owned by private Romanian shareholders. CEE Equity Partners is the investment advisor to the China Central and Eastern Europe Investment Co-operation Fund II, with committed funds of over US$1.2 billion. The funds were established by China Exim Bank in partnership with other institutional investors from the CEE region to capitalize on investment opportunities in CEE countries. The objective of the fund is to identify and partner with dynamic businesses and together contribute to the vibrant growth of the region’s economies whilst providing good returns to investors.
We are looking forward to seeing how Brise Group and CEE’s project will develop in the near future and we are highly optimistic that the market will embrace this initiative, which has been a necessity for a long time now.NINA PIRVU MANAGING DIRECTOR OAKLINS, ROMANIA
Market trends and deal drivers
Brise Group operates in a large market which is dominated by multinational cereal trading companies that take up most of the market and storage capacity. This makes it difficult for smaller farmers and traders to sell their goods independently due to the lack of storage capacity available to them. A large part of Romanian cereal production is exported to other countries, mainly through the port of Constanta, arriving there either by train or by barge. Between 2017 and 2019, 84% of the cereals exported through this port went through the silos of the five biggest multinational traders, leaving little or no room for smaller players. The Romanian market is still lagging behind other Western countries in terms of production efficiency, with an output of three metric tons/ hectare, compared to other European countries which are able to produce nine metric tons/hectare. The output level can be increased through investments in machinery and modern technology for harvesting, irrigation and soil treatment.
M&A Valuation aspects
The valuation was driven by each of the 15 grain terminals individually, primarily based on their storage capacity, catchment area (a radius of 40km around each grain terminal), strategic position and past turnover. The network of 15 silos raised a great deal of interest from investors, mainly due to their good strategic positions and connections to either a railway or a river to facilitate quick transportation to Constanta Port.
Future investments in infrastructure, irrigation systems and better structured financing for local farmers is likely to increase production and margins for the overall market.DRAGOS DARABUT SENIOR ASSOCIATE, OAKLINS
Oaklins found the best partner to develop the business
Oaklins’ team in Romania acted as the sole advisor to Brise Group, assisting in the preparation of the sale process, due diligence, structuring the transaction, negotiations and closing procedures.
Brise Group is one of the largest and most diversified players in the cereal sector, offering a wide range of products and services.