Argentine venture earns Irish firm $83m

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The Irish Times | 7 January 2012
Mark McLornan, founder of Fondomonte, is also the founder of UK-based farmland fund Agro Terra and co-founder of Maera Capital, alongside Rajaa Mekouar, founder of the farmland fund Terra Magna.

by SUZANNE LYNCH and DOMINIC COYLE

An Irish-owned agricultural company with interests in Argentina has been sold to Saudi Arabia’s largest food company for $83 million (€65 million).

Fondomonte was founded in 2006 by London-based investment manager Mark McLornan and Irish farm manager Jim McCarthy, with the aim of capitalising on the rise in global demand for food.

The investment company owns and operates three farms in Argentina, totalling more than 12,000 hectares, which focus on the production of crops such as maize, wheat and soya. Barley, sorghum and sunflower are also grown.

The shareholder base comprises Irish investors, primarily from the southeast of the country, as well as some private investors from the UK and corporate investors. The largest shareholder is Wexford-based agribusiness Cooney Furlong Grain Company.

The initial venture in 2006 to invest in Argentine agriculture involved the consortium of Irish shareholders raising €26 million towards the €41 million acquisition cost of the land. The balance came from the US and British investors.

Aspiring shareholders required a minimum investment of €187,500, The Irish Times reported at the time.

At the outset, they anticipated an annual dividend of 8 per cent per annum on the investment. In 2010, it emerged that the enterprise had reported net returns of 53 per cent in its first four years of operation.

The directors of the company, which was based in Luxembourg, included Walter Furlong, Michael Hannan and Oran McGrath.

Fondomonte has been sold to Almarai, the biggest dairy company in the Gulf region by market value. Founded in 1976 as a dairy processing company, it diversified into bakery in 2007 and poultry production in 2009.

The sale was sealed just days ahead of a vote by the Argentine parliament limiting the purchase of prime farmland by foreigners.

The Saudi company has a historical link with Ireland, having been founded as a partnership between Saudi Arabia and Irish agri-food expert Alastair McGuckian and his brother Paddy.

It listed on the Saudi bourse in 2005 and is the largest food company in Saudi Arabia and one of the largest dairy companies in the world.

The company said the acquisition was part of the company’s drive to expand its supply chain and increase its access to feed for its dairy herd and poultry business.

The transaction was “in line with the direction of the Saudi government towards securing supplies and conserving local resources”, the company said.

The company financed the transaction from its cashflow and Islamic banking facilities.

Saudi Arabia is encouraging food companies to invest in emerging markets in an effort to reduce the level of local grain production, which is extremely water-intensive. However, Saudi Arabia depends significantly on imports to meet its food requirements, and companies such as Almarai have seen their margins come under pressure from rising food prices.
Original source: Irish Times
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