Adecoagro buys the Argentine cooperative Sancor Dairy Company

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Twelve years after the first attempt, the agro-industrial group Adecoagro is about to get its revenge: it will gain control of the SanCor dairy cooperative, a company of the utmost importance for the Argentine dairy industry.

That will be next Thursday when a meeting of farm shareholders of the dairy firm decides as an association whether  Adecoagro can have more than 90% of the assets that are to be transferred. The amount of the transaction is confidential but, according to market sources, the proposal would have surpassed by at least another 20% for another US $ 330 million made by the New Zealand Fonterra cooperative which is facing its own challenges from poor overseas investment decisions.

On November 10, 2006, in a communication to the National Securities Commission (CNV), SanCor produced a memorandum to the market reporting that it had accepted a proposal from Adecoagro to set up a company where, in exchange for US $ 120 million, the investor group would contract 62.5 percent of its share capital.

For the dairy company, it was a necessary aid at a time when the debt was tight, having restructured in 2005 with an amount of US $ 167 million. A lot of the damage for the financial health of the company was due to  the former Secretary of Commerce, Guillermo Moreno, intervening in the market with price and export controls.

From they then Chief of Staff, Alberto Fernandez, to the Minister of Planning, Julio De Vido ( both currently in jail for corruption), many in that government were still in agreement with the operation, according to the report. However, it was noticed that among the ten Adecoagro investors was the controversial American Hungarian tycoon George Soros, and thus the former President Nestor Kirchner ordered to stop the sale.

What came next is known history. The Government made arrangements so that, in exchange for the departure of Adecoagro, SanCor would take a loan of some US $ 80 million from Venezuela to pay against the delivery of exported powdered milk. We know how that ended up.

Today, Soros has no participation in Adecoagro. Among the main investors of this firm, listed on the New York Stock Exchange with a value close to US $ 1000 million, are the Singapore GIC fund with 5.1%, the sovereign fund of Qatar with 12%, a fund of pension in the Netherlands with 12%, while local management and management own 5% in capital.

As in 2006, Adecoagro once again returns to rescue the failing dairy firm that last year was on the verge of bankruptcy.

SanCor fell from a daily processing level of 4.5 million liters to less than 800,000, it closed plants, had a number of its member dairy farmers join other companies and its staffing reduced from 4000 to just under 3500.

But what is it and how was Adecoagro born? Adecoagro was born in 2002 by a group of professionals in the agro field who in that moment saw the opportunity to go out and look for investors around the world to put together a company thinking of two things: the production of grains and giving value to those lands that were proposed for them to buy. Among those entrepreneurs investors was and continues to lead it, is its current CEO, Mariano Bosch, who had previously been for eight years with CREA as a technical advisor, and for four, with the Produce Conservando Foundation.

In its first appearance on the land scene it became obvious that the company was strong. First they bought 75,000 hectares, at a value of US $ 1000 per hectare, owned by Pecom Agropecuaria, owned by businessman Gregorio Perez Companc.

The next steps were to grow, in addition to Argentina, Uruguay and Brazil. Not only with the business of buying land but to plant and add value to them, but also opening the business to other activities, such as sugar, milk production and energy.

At present Adecoagro is a giant that has 32 of its own establishments and operates as administer of 435,000 hectares. It produces sugar, ethanol and electric power in Brazil. Sowing grains in Uruguay, while in Argentina, in addition to the production of crops, rice was also diversified with three mills and in milk production with two large supper modern dairy farms – in a barn system – with 7,000 milking cows indoors.

Source: La Nacion


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