9 December 2014 – KKR is taking a $100m significant stake in Sundrop Farms, an agricultural technology company that relies on solar power and seawater for the huge greenhouses it builds and operates in arid places including Australia.
The transaction comes at a time private equity firms are increasingly backing technology companies across a wide variety of sectors, though the money they can put to work is a small fraction of the large cheques they used to write before the financial crisis.
Most PE firms have steered clear of agriculture in the past few decades, but that is now changing with the increasing use of technology. Among the developments that have attracted new investment are the adoption of in-ground sensors that can increase crop yields and the search for less water-intensive methods of farming.
“Agriculture has been a tough business since suppliers have no pricing power and the revenues have been volatile, partly because of weather,” says Philipp Saumweber, the chief executive of Sundrop Farms. “Also, the inputs are so costly.”
Sundrop’s plan to use solar power to desalinate the water and maintain the right temperature in its greenhouses means it could become a very low-cost producer once its greenhouses have been constructed. “We can operate in places others can’t,” Mr Saumweber said.
The company, which is based in the UK, plans on expanding its greenhouse operations from South Australia to the Middle East and the southwest of the US.
Sundrop’s environmentally sustainable technology drew the attention of KKR. The US-based company has positioned itself as a leader among private equity firms in adopting good environmental, labour and governance policies, says Joe Bae, KKR’s managing partner for Asia.
KKR has also made an investment in sustainable farming through its stake in Santanol, a company which owns sandalwood plantations in Australia.