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Soros-backed Adecoagro ( Argentine Based ) takes land gains to $132m

Adecoagro realised more of the substantial gains within its 283,000-hectare landbank by selling one of its Argentine farms in a deal valuing it at 11 times the purchase price a decade ago.

The South America farm operator, in which billionaire George Soros’s investment group is the top shareholder, said it had sold 51% of the company controlling its Santa Regina farm, in Buenos Aires province, for $13.0m, equivalent to $7,058 per hectare.

The, unnamed, buyer has an option, expiring in June 2014, to buy the rest of the farm at $7,370 per hectare, taking the total bill to $26.1m.

That is some $3m above an independent valuation of the farm by consultancy Cushman & Wakefield in September, and compared with a purchase price of $2.3m in 2002, equivalent to $625 per hectare.

Capital gains

Adecoagro said that the sale “evidences our ability to continue generating shareholder value through its land transformation activities”.

The group, which has realised gains of more than $132m from farm sales over the last seven years, said that measured disposals allowed it “to redeploy its capital efficiently, and continue expanding its operations by acquiring land with high transformation potential”.

The proceeds from the San Regina deal “will be reinvested in projects with higher risk-adjusted returns, which will allow the company to continue growing and enhancing shareholder value”.

The group, which has now sold more than 40,000 hectares since 2006, claimed an internal rate of return of 34.2% from Santa Regina, even higher than the 31.8% achieved on the San Jose farm, also in Argentina, which the company sold in August.

‘Fertile, loamy soils’

Adecoagro sold Santa Regina under a sale and leaseback deal, meaning that it will keep farming the 3,600-hectare site, located some 330 kilometres from the major grain port of Rosario.

The group describes the farm as having “deep, fertile, loamy soils”, enabling “high yields, mainly in the production of wheat, soybeans and corn”.

Here is the details of the Lease Back

Adecoagro SA | 3 Jan 2013

Sale and Lease Back of Santa Regina Farm

Under the terms of the agreement, Adecoagro sold 51% of the outstanding shares of Santa Regina S.A ., a company whose main asset is the Santa Regina farm, for a total consideration $13.0 million (equivalent to $7,058 per hectare and 11% above Cushman & Wakefield’s independent appraisal dated September 2012), and has granted the buyer a call option to acquire on or before June 2014 the remaining 49% interest for $13.1 million (equivalent to $7,370 per hectare, 16% above Cushman & Wakefield’s independent appraisal dated September 2012). Adecoagro will lease and operate the farm during the next two crop years as of May 2013.

Santa Regina is a 3,618 hectare farm which was purchased by Adecoagro in 2002 for a total of $2.3 million, or $625 per hectare. The farm has 3,200 hectares of croppable land which have been transformed and are currently used to produce corn, soybean and wheat. During the last ten years, Adecoagro has operated Santa Regina under a sustainable production model focused on no-till farming, crop rotation, balanced fertilization and other best practices, which have enhanced productivity and soil quality. Considering the purchase price, transformation capital expenditures, operating cash flows and exit price, this investment generated an internal rate of return of 34.2%. The book value of Santa Regina in our balance sheet was $3.1 million, therefore this transaction will result in approximately $19.8 million of operating profit recorded in the fourth quarter of 2012, with the following breakdown: (i) a $9.3 million gain corresponding to the sale of 51% stake of Santa Regina S.A ., and (ii) a $10.5 million gain corresponding to the fair valuation of Adecoagro’s remaining 49% interest in Santa Regina S.A . according to IFRS accounting rules.

Adecoagro believes that the consistent transformation, development, and sale of farms like Santa Regina evidences our ability to continue generating shareholder value through its land transformation activities and sustainable production model. During the last seven years, Adecoagro has been able to capitalize gains of over $132 million by strategically selling at least one of its fully mature farms per year. Monetizing a portion of its land transformation gains each year allows Adecoagro to redeploy its capital efficiently and continue expanding its operations by acquiring land with high transformation potential. The proceeds generated by the sale of San Regina will be reinvested in projects with higher risk-adjusted returns, which will allow the company to continue growing and enhancing shareholder value.

Investor Relations Department
Charlie Boero Hughes, CFO

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