Cargill unit Black River plans $400 mln Asian food fund

Reuters | 18 April 2011

Deda Chicken Processing Plant, Dehui City, Julin Province, 2005 (Photo: Edward Burtynsky)
By Kevin Lim

Black River, the private equity arm of U.S. agribusiness and trading giant Cargill , is raising a $400 million fund to invest in firms that will benefit from rising Asian demand for meat and vegetables.

The proposed Black River Capital Partners (Food) Fund, which has already received about $200 million in commitments, expects to invest about half the money in China, where people are eating more protein and fruits and less cereal and tubers.

"GDP growth is driving food consumption in emerging markets (and) the demand for safe and high quality food, against a backdrop of outdated production methods and fragmented industry means high margin revenue opportunity for leading players," Black River said in presentation notes seen by Reuters.

"Recent surveys indicate more than 96 percent of (Chinese) consumers are very concerned about food safety and 75 percent of interviewees expressed a willingness to pay extra for safer food," it added.

Black River's Singapore office could not be reached for comment.

The price of grains and other agricultural commodities have risen in recent months, pushing up inflation in many developing countries and raising concerns about possible food shortages.

Last week, the World Bank warned higher global food and energy prices are affecting a larger swathe of developing countries than at the beginning of the year, threatening to push more people into poverty. [ID:nWALEFE768]

According to the presentation, Black River is targeting 30 percent gross cumulative return per annum for the planned food fund, which has a life of 10 years. It will charge a 17.5 percent performance fee if it achieves a hurdle rate of 8 percent.

Black River's investment pipeline includes a Chinese pork producer and distributor, a duck farming firm in northern China, a fish producer in Costa Rica and a frozen fish processor in Singapore.

Institutions that have committed money to the food fund include Dutch pension fund PGGM and Utimco, which manages money for the University of Texas and Texas A&M University, according to the presentation Black River is now targeting investors in Singapore and Hong Kong.

(Editing by Muralikumar Anantharaman)