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Jorge Arpi, CEO of Los Grobo in Argentina: new investors look to add value to make it attractive for strategic funds

 Grupo Los Grobo and Victoria Capital Partners (VCP) have just announced the injection of USD 100 million to reduce its current financial exposure.

CEO Jorge Arpi is based in the headquarters of Agrofina, the agrochemical company that forms part of the Los Grobo. There were questions about how this equity fund is thinking on a forward strategy of this iconic company of Argentine farming.

Jorge said Grupo Los Grobo is no longer a family company. Brothers Matilde and Gustavo Grobocopatel still retain 24% of the shares, whilst VCP with other co-investors holds the majority 76 per cent. These co-investors are the IFC (the financial arm of the World Bank), the University of Texas Investment Management Company and the Dutch Entrepreneur Development Bank FMO.

“As a private equity company, VCP has a precise mandate, about how to invest the money, in what geographical area, in what kind of business, and also has a clear governance system: a professional executive management were shareholders don’t participate, and an Executive Committee which does act on behalf of the shareholders who supervise the management plus a shareholders board that decides the strategic issues of the company”, Jorge explained.

Second, VCP in the medium or long term will sell Los Grobo. Jorge, a senior executive of the VCP board, managed Peñaflor, another iconic agrifood company but in the wine and beverage business, when VCP bought from the Pulenta family in 1999.

“Jorge said they are always looking for companies to which we can add value. The investors know that they will not recover the money via dividends; they know that the company must be revalued by adding value before a new strategic buyer is interested in it”.

The Peñaflor case is considered as a successful example. They bought the company from the Pulenta family; then they re-engineered it selling some business units and concentrating the business in the fine wines business. In 2011 they sold the company to Bemberg family after they had sold brewing and beer company Quilmes to AmBev.

“It’s clear that the private equity companies exist because strategic buyers also exist”.

But, what does Grupo Los Grobo represents today?
1.- Agrochemical company Agrofina with US$140 revenues per year.
2.- Inputs selling unit, with US$100 million revenues per year.
3.- Wheat milling unit (Molino Canepa) with US$20 million revenues.
4.- Grains origination, storage, and commercialization with US$60 million revenues.

Jorge stressed the importance of a business plan for the company. Despite the complexity of this kind of business (mainly due to the logistic planning and prices hedging) he describes Los Grobo as an “origination company” and “a services supplier to exporters”. In fact, he conceives the company as “a partner” of the exporters.

To achieve this goal they are opening new commercial offices in the interior of Argentia, but they are very cautious about investing in new storage facilities. “To maintain a logistic balance is a key issue,” Jorge said. “We can’t ‘tame the beast’ without some storages facilities but, at the same time, to have a facility in every place where we are operating is just too expensive.

There is not economic return for investment in grain storage; therefore to lease storage plants is a possibility. In the next 4 or 5 years, we will go slowly, but we will grow our storage capacity not necessarily buying or mounting new facilities”, Jorge explained.

What’s about the agrochemical side of the business?

The CEO responded that they found a company with a valuable I+D section and a company with the capability to synthesizes and formulate its chemical products. “It’s a difficult and competitive business, but we are going well; we are improving the profitability of Agrofina, achieving a significant cost saving”, he adds.

And in respect to Molino Canepa, Jorge remarked that it is a business unit with a high level of autonomy, that represents for Los Grobo a ‘client’ for at least 100,000 tonnes of wheat per year.

Epilogue

Hearing the CEO of Los Grobo speak the feeling is that the management is concentrated on improving the financial ratios, without significant investments in hard assets.

Probably Agrofina or the wheat mill will be sold in the short or medium term and that the company will remain focused on the farming, inputs retail, and the grain operation.

The remaining question is who will buy Los Grobo, in eight or ten years.

Jorge opines that Argentina is a strategic country in the food and agribusiness global map, and there are in the worldwide strategic operators that will be interested in to buy the company once VCP management has restructured it.

Source: efarm News

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