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Brasil Agronegócio commits USD82m to joint venture with Agrifirma Brasil Agropecuária

Private equity fund Brasil Agronegócio FIP is to commit USD82m of fresh equity capital to acquire a majority controlling stake in a joint venture company with Agrifirma Brazil, Agrifirma Brasil Agropecuária Ltda (ABA). The two partners expect to obtain a listing for the shares of this jointly owned company on the Brazilian stock exchange in the next few years. 

Approximately half of Agrifirma Brazil’s existing assets, including all its holdings of transformational land, are being consolidated into ABA, currently a wholly owned subsidiary of Agrifirma Brazil Ltd.  FBA will invest R$130 million ($82m) for a majority controlling shareholding in ABA, which already employs the majority of Agrifirma’s experienced farmland management team.
 
Julio Bestani, a co-founder and CEO of Agrifirma Brazil, will become the CEO and a director of the new joint venture. The board will be chaired by Ian Watson, one of the founders of Agrifirma Brazil, and will include three independent non-executive directors and two representatives of FBA. Five of the seven directors will be Brazilian. The company’s head office will be in Sao Paulo.
 
The R$130m injection of capital by the Brasil Agronegócio FIP  will enable the joint venture to accelerate its farmland development programme over the next three years while remaining fully compliant with the many Federal and State Government regulations which govern the acquisition and operation of farmland in Brazil. ABA intends to seek additional acquisitions of land that are suitable for its proven transformation methods.
 
Following the transaction, Agrifirma Brazil will change its name to Genagro Ltd In addition to its minority shareholding in ABA, Genagro will retain direct ownership of one fully developed farm in Brazil, plus cash, inventories and other financial assets totalling approximately $52 million. The Board of Genagro intends to investigate opportunities to make additional investments in the agricultural sector in countries outside Brazil and in due course expects to launch its own IPO.  The transaction and change of name were approved by its shareholders on 31 August 2011.
 
Commenting on the transaction, Ian Watson, the Chairman of Agrifirma Brazil, says: “We are delighted to be entering into partnership with one of Brazil’s most successful and prestigious investment houses. Their investment in ABA is a big vote of confidence in our business model and management team and enables the joint venture to press ahead at full speed with development of its farmland portfolio. It will also pave the way for further acquisitions and the listing of both companies”. 
 
”Agriculture is a important engine for economic development in Brazil and contributes a significant portion of GDP, employment, and foreign exchange earnings,” says Ricardo Propheta, co-head of private equity at BRZ Investimentos. “Increasing our portfolio with Agrifirma is a vital part of Brasil Agronegócio FIP’s strategy to support agribusiness development and bring  the best results for our clients”.

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