Adecoagro Pricing Drags into Night

Adecogaro was set to have fixed the price of its US IPO by this morning, expecting to raise more than $400m. The LatAm agricultural play is selling 21.4m primary and 7.1m secondary shares at $13-$15 each. The deal would raise $400m at the midpoint, and also may add a 4.3m share greenshoe. “There are many private vehicles making a play on Latin American farmland, but few public ones, and it is a positive sign that they are starting to list,” says Pedro Richards, an equities analyst covering agricultural companies at Raymond James Argentina. He notes Adecoagro offers the combination of a play on land valuation and a play on actual farming operations. Comparable listed companies include Brazil’s SLC Agricola, more of an operational play, and Argentina’s Cresud and Brazilian BrasilAgro, which are mostly land plays at this point, he says. The lack of publicly-traded agriculture plays and high prices drives investor interest, he adds. Other than price risk, Richards explains, legislation limiting foreign farmland ownership in Brazil, which limits the potential for acquisitions. As part of the operation, shareholder Al Gharrafa Investment Co, a unit of Qatar Holding, has agreed to buy $7.4m shares at $13.44 each, as long as the total IPO raises at least $400m. The largest shareholders, George Soros’ Pampas Humedas (34.0%) and HBK Investments (25.6%), expect to see their stakes reduced to 21.4% and 16.1%, respectively. Al Gharrafa holds 6.5%, and could see its holding grow to 11.2%. Credit Suisse, Morgan Stanley and Itau are global coordinators and joint bookrunners, with Deutsche as bookrunner. The Luxembourg-based farmland venture operates in Brazil, Argentina and Uruguay and is involved in farming, energy production and land development. It plans to use proceeds to fund construction of a sugar and ethanol mill in Brazil and expanding its farming business.