washington tree fruit industry - leading middle market ... · long-term macro trends are favorable...

Washington Tree Fruit IndustryMarket Trends & Analys i s 2020

2

Executive Summary

The WA Tree Fruit sector is experiencing a final wave of consolidation that began roughly twenty years ago. The most recent, and a likely final, wave

began two years ago and is accelerating through the first quarter 2020. Institutional Capital is entering the space at an accelerated pace and

expected to continue throughout the year as more growers and packers seek equity for growth for succession planning, to recapitalize balance

sheets, and achieve scale necessary in today’s market. Macro trends such as downward pricing pressure, increased capital intensity, rising industry

minimum wage, international trade tensions, tight labor market, agricultural technology adoption have stressed the balance sheets of sector

participants and show no signs of subsiding in the near-term. Despite today’s challenges, Cascadia sees a bright future for the sector once the

downcycle runs its course and the industry-wide consolidation process completes. The enterprises that make it through will emerge larger and more

productive as both larger and institutionally-backed players use the downcycle as an opportunity to expand and scale. A key determinant of

profitable winners and losers will be a Company’s ability to attract institutional capital as well as acquire quality assets, while building a deep and

high-quality management team that can integrate technology into operations.

3

Industry Overview

4

Key Industry Trends Today

Key Factors at Play

0

50,000

100,000

150,000

200,000

1986 1993 2001 2006 2011 2017

Red Delicious Gala

Fuji/Red Fuji Golden Delicious

Granny Smith Honey Crisp

Braeburn Pink Lady

Cameo Other

(Apple acreage by variety)

PositiveNegative Neutral

Best Growing Region / Scarcity Value

Long-Term Macro Trends

Water Rights & Availability

Higher Yields

Increasing Barriers to Competition

Increasing Capital Intensity

Labor Challenges / Rising Wages

Tariffs / International Trade Tensions

Retailer & Crop Input Consolidation

Land Value Plateau / Temporary Decline

New Technology

Changing Varieties

Industry Consolidation

New Access to Institutional Capital

Positive for Some, Negative for Others

Industry is Currently Experiencing Short-Term Headwinds

• Apple grower/packers are experiencing increased pricing pressure in conjunction with higher farming expenses largely due to new labor compensation laws and increased labor competition. Average revenue per bin has been steadily decreasing since 2015 and has recently reached a multi-year low

Industry Dynamics are Changing at a Rapid Pace

Mid to Long-Term Macro Trends Remain Favorable Varietal Shift 1986-2017

Consolidation is Happening as a Result

• Average apple yield per acre has increased 28% from 2008-2018 as a result of capital investment into more efficient farming practices, improved apple varieties and new technologies. It is becoming increasingly more capital intensive for a grower/packer to compete at scale

• A growing population with limited farmable land, as well as consumers increasing preference for healthy fresh foods will benefit the industry in the long-term. Additionally, the shift to more consumer-friendly varieties (right) will help grower/packer profitability as more new acres come online in the coming years

• Some industry participants are taking on equity partners in an effort to scale and remain competitive while others are seeking partners to see them through the temporary downcycle. Additionally, M&A activity at both the retailer level and crop input level is adding further consolidation pressure at the grower, packer, and sales desk levels

5Sources) Washington State University, U.S. Apple Assoc., Plan Washington, USDA, Theodore E Grantham and Joshua H Viers 2014 Environ. Res. Lett. 9 084012, West Water Research

Abundant water sources replenished from

snowfall in the Cascade Mountain range Deep, well-drained volcanic soils with

high levels of key mineralsPlentiful sunshine throughout the year

Protection from high winds and other

forms of extreme weatherDry climate and ideal temperature reduce

rates of disease and pest problems

Ideal Growing Conditions for both Organic & Conventional Crops - Ability to Produce 300 Different Kinds of Commodities

Ideal Growing Conditions in WA State Creates Valuable Agriculture Market

91% 84% 79% 75% 70%62%

55%46%

36% 32% 31% 29% 22%

Raspberries Apples Hops Spearmint Oil Wrinkled

Seed Peas

Sweet

Cherries

Concord

Grapes

Pears Niagara

Grapes

Green Peas,

Processing

Carrots Sweet Corn,

Processing

Potatoes

Washington Water Will Become More Valuable

Cumulative Percent Gain 2002-2017 S&P 500 vs WRPI Water Rights Price Index Case Study: California Water Demand

The red, thicker lines

(right) represent areas

where water usage

exceeds water right

allocation by 101% -

1000% largely due to

agricultural irrigation

demands. Out of 27

major rivers in California,

16 have allocation levels

greater than 100% of

natural supply

High demand for water in California has driven up water rights valuations. Washington’s

water rights, which are currently cheap relative to California, are poised to experience a

similar increase in valuation as the larger market realizes Washington as the US’s premier

growing region and the agricultural industry experiences continued growth

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

S&P 500 WRPIx

Washington farmland is among the highest quality farmland in the world due to favorable climate, soil and water conditions and is poised for significant long-term

price appreciation. These favorable conditions are turning Washington into the new California for agricultural production

Approximate Percentage of US Market Share (Production)

Based on 2015 water

rights market activity

(total value and

volume traded),

California water rights

averaged a price of

$706 per acre foot as compared to

Washington at $250

per acre foot

6

Long-Term Macro Trends are Favorable for the Washington Tree Fruit Industry

A Growing PopulationA Rising Middle Class Demanding Quality

0.91.1

3.0

4.4

7.4

9.0

10.210.8

11.2

0.0

2.0

4.0

6.0

8.0

10.0

12.0

1760 1820 1880 1940 1970 2000 2030 2060 2090

(Population in billions)

• The global population is projected to grow by 35% over the next three decades

• Farmers and producers are utilizing technology in order to meet the growing

demand for food. The way to optimize the output of variable inputs is through

higher yielding farms via new technology, higher density orchards and precision

farming

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030

Upper Middle Lower

• The increasing purchasing power of this rising middle class will alter global food

consumption patterns from basic staples towards more appetizing, nourishing and

safe foods

with Limited Arable Land

(Exports in Billions of Pounds)

And a Global Economy Steadily Demanding More US Tree Fruit

Sources) Brookings Institution, Nutrition Business Journal, Acre Trader, World Bank, USDA

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Arable Land Use Per Person (in Hectares)

North America World

- 39%

- 29%

0.0

0.5

1.0

1.5

2.0

2.5

US Apple Exports

(Population in billions)

7

However, the Industry is Two Years into a Temporary Rebalancing

$-

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

$800.0

2015 2016 2017 2018 2019

Average Grower Revenue Per Bin

Pink Lady Reds Granny Honeycrisp Fuji Gala

$-

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

2015 2016 2017 2018 2019

Average Price Per Box

Pink Lady Reds Granny Honeycrisp Fuji Gala

$307.9 $300.4 $279.0

$254.6

$214.4

2015 2016 2017 2018 2019

Whole Farm Average (All Varieties)

Unusually Bad Weather

Tariffs Announced

Based on Cascadia Proprietary Data Averaged from Various WA Grower/Shippers & WSTFA

$-

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

$800.0

2015 2016 2017 2018 2019

Average Grower Revenue Per Bin vs Average Expense Per Bin

Avg. Farming Expense/Bin Increased 11.5% from 2011-2019

8

$-

$50

$100

$150

$200

$250

$300

$350 Average Revenue Per Bin (All US Fresh Apple Production)

Though the Industry Continues to be “Up and to the Right” Over the Long-Term

3.2% CAGR

2.8% CAGR

Start of Current Downcycle

Average Revenue Per Ton (All US Fresh Sweet Cherry Production)

Sources) USDA, 1 Bin = 700 lbs

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

9

Poorly Capitalized Balance Sheets are Exacerbating the Problem

Many Growers are Taking on More and More Debt

• Apple grower/shippers, who often shy from equity capital, seek more and more debt from lenders to finance increasing capital requirements and the transition to newer varieties and higher density orchards

• Many growers have put leverage on rising land values, and the expectation of continued near-term land value appreciation

• Cash flow from new plantings often takes 5 years, producing a repayment gap from the time the financing is received

• The increased debt is leaving little room for error for many growers in an industry that can be cyclical

• As the industry has experienced a cyclical reduction in land prices and/or significant apple price decreases, growers that are overleveraged will have few options other than seeking access to equity capital or selling

• Various grower/shippers have turned to off-balance sheet arrangements, further exacerbating the problem

• Forward thinking growers have recognized this and are turning to minority/majority equity capital now

US Farm Sector Debt, Inflation Adjusted

$0

$100

$200

$300

$400

$500

197

0

197

2

197

4

197

6

197

8

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

201

0

201

2

201

4

201

6

201

8

202

0F

Real Estate Debt Nonreal Estate Debt

“Farmers are in a level of debt not seen since the 1980s

agricultural crash. About one in 10 crop farms is “highly

leveraged,” meaning it has lots of debt, as are one in 15

dairy farms” – Sonny Purdue, US Secretary of Agriculture

($ in Billions)

Source: USDA

10

Supply Chain Consolidation Adding Pressure

Retail Consolidation:

Maturing

Supplier/Crop Input Consolidation:

MaturingGrower/Producer Consolidation:

In Process & Accelerating

Acquires for

$9 bn (2014)

Acquires for

$14 bn (2017)

Merges for

$14 bn (2015)

Acquires for

$66 bn (2016)

Merged for

$73 bn (2017)

Acquires for

$19 bn (2016)

Acquires for

$450m (2015)

Acquires for

$342m (2015)

Acquires

(2017)

Large, Multi-Billion Dollar Consolidations are Squeezing the Grower

US Farmland Value vs Net Cash Income Case Study: WA Growers Respond By Merging Sales Desks

In 2017, Borton Fruit merged sales desk with Chelan Fruit to create the largest

apple marketing business in the country. This was an effort to counterweight

retailer pressures for growers under the Chelan umbrella

Other Sales Alliances Form:

Washington Fruit

Underwood Fruit

McDougall & Sons

Columbia Fruit

Highland Fruit

Double Diamond

Kershaw Fruit

CPC International

Cowiche Growers

Monson Fruit

Stemilt

Douglas Fruit

Hansen Fruit

Source: USDA Economic Research Service, Farm Bureau, Pitchbook, MergerMarket

Acquires

(2020)

Acquires for

$550m (2017)Acquires

(2019)

$-

$20

$40

$60

$80

$100

$120

$140

$160

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

Value Per Acre Net Cash Income Per Acre

Estimated 50,000 – 100,000 Commercial Retailers & Distributors in the US with Heavy

Market Share Concentration in the Top 20

Estimated 50,000 – 100,000 Commercial Farm Supplier or Crop Input Companies in the US with

Heavy Market Share Concentration in the Top 20

The USDA counts roughly 2,050,000 Farms and Growers in the US

11

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1987 1992 1997 2002 2007 2012

<100 acres 100-199 acres 200-499 acres 500-999 acres 1,000-1,999 acres >2,000 acres

Large Farms are Getting Larger

61.7% 75.0% 80.7%

57.7% 41.8%

33.3% 36.4%

56.9% 71.0%

4.6%

6.2% 5.2%

18.9%

20.9% 25.2% 26.6%

17.1% 7.9%

28.3% 15.2% 12.2% 23.4%

37.2% 41.5% 37.1% 25.9% 18.4%

0%

20%

40%

60%

80%

100%

Retirement Off-Farm

Occupation

Small Farm Moderate Farm Midsize Farm Large Farm Very Large Farm Corporate Farm All Farm

OPM <10% OPM 10%-25% OPM >25% Unknown

Large-Scale Farms Experience Meaningfully Better Margins than their Small-Scale Counterparts

~70% of all small farms are operating with less than 10% profit margins while

only ~17% on average are operating with greater than 25% profit margins

Only ~37% of large farms are operating with less than 10% profit margins

while ~39% on average are operating with greater than 25% profit margins

Farms with >2,000 acres now represent more than 30% of all U.S. Farms

As a result, Scale Matters More than EverA S T H E I N D U S T R Y C O N S O L I D A T E S , L A R G E - S C A L E P L A Y E R S A R E E X P E R I E N C I N G I N C R E A S I N G L Y S I G N I F I C A N T C O M P E T I T I V E A D V A N T A G E S

12

4,000

1,450

526

2008 2018 2028

27,600

35,200

44,893

2008 2018 2028

And Consolidation is Happening

Increased Productivity – Yield From One Acre Annually From Fewer Players

And Creating a Barbell Industry

Specialized/Differentiated

Large Scale

Few vertically integrated

constituents with 7,500 –

10,000+ acres that

compete on scale,

volume and platform

offering

The industry will continue to consolidate into a barbell industry of few, large-scale players (7,500 -10,000+ acres) that compete on volume & scale and few, specialized

& differentiated players that dominate a niche

Highly specialized, niche

players such as organic,

proprietary varieties,

brand name, etc. Players in the middle have been or will continue to be consolidated, creating acquisition and growth

opportunities for the “platform” companies

In the past 10 years, the number of independent growers has dropped from 4,000 to 1,450, a 64 percent decrease even though the overall acreage

is roughly the same; with few operating as a scaled platform with increased productivity squeezing smaller players not able to invest in yield

increasing technologies

Independent WA Apple GrowersAverage LB/Acre (All US Apples)

- 64%+ 28%

+ 28%

- 64%

Projected Based on

Current Run-Rate

Projected Based on

Current Run-Rate

13

Major Players of the 1990s (Sample) Major Players Today (Sample)

Institutional Capital Constituents in Agriculture have Dramatically Increased

https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.homesteadcapital.com%2F&psig=AOvVaw0EUIFCTf1qsiN1BMshfIcj&ust=1582420961957000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCLCX5tD_4-cCFQAAAAAdAAAAABAD

14

Recent M&A / Equity Financing Activity in Vertically Integrated Fruit

And Institutional Capital is Accelerating the Consolidation

2020: Several Companies are “In-Market” Seeking Capital with Numerous others Preparing/Exploring Going to Market

2020: Pride Packing Partners with Hancock Agricultural (Institutional)

2019: Auvil Fruit Company Partnered with Fiera Comox (Institutional)

2019: Olympic Fruit Partnered with AgIS Capital (Institutional)

2019: Gerawan Farming Partnered with Paine Schwartz Partners (Institutional)

2019: Yakima Fruit Partnered with Hancock (Strategic/Institutional)

2019: Stemilt Growers Partnered with Prominent Family Office Group

2019: Legacy Fruit, Valley Fruit, Larson Fruit, Sage Fruit Partnered with International Farming Corporation (Institutional)

2019: Broetje Orchards Partnered with Ontario Teacher’s Pension Plan (Institutional)

2017: Earl Brown & Sons Partnered with Foreman Fruit (Strategic)

2017: Wawona Packing Partnered with Paine Schwartz Partners (Institutional)

2017: Pride Packing Partnered with Vanguard International (Strategic)

Pre-2017: Munger Bros Partnered with Hortifrut SA (Strategic)

Pre-2017: Taggares Fruit Company Partnered with Harvard Management Company (Institutional)

Early Movers in Tree

Fruit Enterprises

15

Institutional Capital Changes Everything

Institutional Equity Playbook Process of Consolidation

• Enter a new industry, create efficiencies through better management

practices, better use of balance sheet, large amounts of capital and

scale (via organic growth and acquisitions)

• The presence of institutional capital and the efficiencies they bring to

their companies enables them to be the low-cost producers

• This, in turn, puts stress on companies to match the efficiencies that

the companies with capital are able to produce or, if they cannot, be

forced to survive with below market economic returns

• Up until institutional capital came into the tree fruit sector, the

competition was family businesses worth hundreds of millions of

dollars. Now the competition is equity investors with billions of dollars

We expect this dynamic will force industry participants of scale to

access institutional capital for a minority or majority of their cap table

• Institutional capital will make their bets in large, market leading

companies that are termed “platform” investments

• The presence of private equity and the efficiencies they bring to their

companies enables them to be the low-cost producer

• We estimate there will be 6-10 platform investments

• After institutional investors make their platform investments, they will

make additional investments into their “platform” companies to

enable them to buy smaller companies referred to as “add-ons”

Once investors make their platform investments, all future acquisitions in

the industry will be made via the 6-10 platform companies we expect to

emerge

Case Study: Semiconductor Fabricators Consolidate

Fabricators have experienced heavy consolidation in order to keep up with increasingly expensive R&D & Capital Expenditure to manufacture smaller, more

efficient chips at scale. Similarly, recent technological innovation and varietal shifts in the Tree Fruit industry will force consolidation as industry participants will

find it increasingly expensive to stay competitive with more scaled grower/packers with superior margins and profit generation

Source: Capital Group Global Equities Research, CSI Market, McKinsey & Company Research, Capital IQ, IHS Markit

25

18

13 13

8 5 4 3

$0

$5,000

$10,000

$15,000

$20,000

0

5

10

15

20

25

30

2002-2003 2004-2006 2006-2008 2008-2010 2010-2012 2012-2014 2014-2016 2017-2019

($ in billions)Number of Semiconductor Fabricators with Leading-Edge Capabilities - Ability to Manufacture the Smallest Chips at High Volume

vs

Combined Average Annual CAPEX and R&D Expense

2003 Avg. EBITDA-CAPEX Margin

-54.5%


2.8%


11.3%


17.8%

16

Cascadia’s View of the Industry Today and Tomorrow

Current State of Sales Desks (Sample)

More Consolidation to Come20+ Total Sales Desks Today, of which 10-12 have Scale

There will be roughly 4-5 Sales Desks with 80% - 90%+ Market Share in the Coming Years

Sales Desk 1 Sales Desk 2 Sales Desk 3 Sales Desk 4

5-6 Mid-Large

Grower/Packers

5-6 Mid-Large

Grower/Packers5-6 Mid-Large

Grower/Packers

5-6 Mid-Large

Grower/Packers

Zirkle Fruit

Allan Bros

Matson Fruit

Earl Brown & Sons

Price Cold Storage

Blue Star Growers

McDougall & Sons

Columbia Fruit

Highland Fruit

Double Diamond

Stemilt

Douglas Fruit

Hansen Fruit

Peshastin Hi-Up

Borton Fruit

Gebbers Farms

Chelan Fruit Co-op

Columbia Valley

Crane & Crane

Apple King

Strand Apples

Conrad & Adams

Andrus & Roberts

Kershaw Fruit

CPC International

Cowiche Growers

Monson Fruit

Blue Bird

Quincy Fresh Fruit

Jack Frost

Yakima Fruit

Rocher Fruit

Stadelam Fruit

Custom Apple

Columbia Reach

Gilbert Orchards

Davis Orchards

Prentice

Diamond Fruit Growers

G&G

Broetje Orchards

Congdon Orchards

Evans Fruit

Auvil Fruit Company

Northern Fruit

Independents

Legacy Fruit

Olympic Fruit

Valicoff Fruit

Oregon Cherry

Washington Fruit

Underwood Fruit

17

Steady Growth & Appreciation

Fewer, Stronger Players

Consolidation & Downcycle

Pressure Building

• Retailers and suppliers have

been consolidating, becoming

larger and more demanding

from both a pricing perspective

as well as product offering and

varietal mix requirements

• Black swan events such as tariffs

and poor weather further

stressed many growers and

farmers

• Many growers and farmers over-

leveraged their balance sheets

focusing more on asset value

rather than cash flow

• Total US farmland net cash

income is at a multi-year low

point and average tree-fruit

grower revenue per bin is at the

lowest point its been in years

• Farmland acre values which

have traditionally shown steady

increases each year have

plateaued and begun to dip

• Seeing strong upside

opportunity, long-term

orientated institutional capital is

entering the space at an

unprecedented rate, further

driving consolidation

• Cascadia sees an industry-wide

shakeout of weak hands taking

place. Larger growers and

institutionally backed growers

will come out of the downcycle

more productive, having

acquired small-mid size players

and reinvesting in their own

businesses

• Cascadia also sees

consolidation at the sales desk

level as more growers large and

small continue pool volume at

better terms. This is expected to

stabilize tree fruit pricing going

forward

• Cascadia believes WA

agriculture is poised for

outstanding long-term growth

due to:

Last 2-3 Years Today Next 2-3 Years Long-Term

Key Takeaway’s for WA Tree Fruit Industry

I. Consumer trends in fresh fruit

and vegetables increasing

overall demand

II. Tree fruit prices will stabilize

and increase over time as

more profitable club varieties

are planted and come online

III. Growing population with a

finite amount of arable

farmland

IV. WA State’s superior growing

conditions and climate

V. Water becoming more scarce

VI. Industry participants

continually growing and

becoming more productive

over time

18

Valuation Data Points

19

Investor’s Perspective: Drivers of Value for Vertically Integrated Tree Fruit

▪ Investors want to partner with growers who

have recently reinvested into the business

and have yet to see the fruits of their

labor. This usually takes the form of new

acres coming online or new facilities that

will increase efficiency and productivity

Investments Yet to Yield

▪ Investors are aware of the industry wide

varietal shift and increasing importance of being a leader in new, more profitable

varieties such as Cosmic. Growers who

have the majority of their acres allocated

in Reds, Gala, Braeburn, Goldens and

similar will likely receive a discount to

valuation. Generally, a grower’s varietal

mix should be 25% or more trending or club

varieties which includes Honeycrisp, and

no more than 15% legacy varieties such as

Reds or Braeburn. Pink Lady, Gala, Fuji and

similar varieties make up the middle

ground

▪ The ability to grow an exclusive or semi-

exclusive variety is becoming increasingly

important and viewed as a differentiator and hedge to the industry

Varietal Mix & Exclusive Varieties

▪ Investors are seeking platform investments

which are better suited to roll-up small-mid

size farms in the coming years, targeting

growers with a few thousand acres or more

▪ Investors are targeting grower/packers with

enough capacity to handle orchard growth

through acquisition, targeting packers with 400,000 annual bin throughput capacity or

more with existing utilization of 60% or more

Scale & Utilization

▪ Investors are placing more emphasis on

the importance of good data and

financial management and reporting

processes. They view grower/packers as

data driven enterprises

Data Management

▪ Investors typically look for 60%+ high density

(700 trees per acre or more), V-trellised

orchards that yield on average 75 bins per

acre or more. Whole farm average bins per

acre is ideally 65+

High-Density V-Trellised Orchards

▪ Investors see appraised asset value as a

necessary risk mitigant and place

preference on companies that can

prove material asset value

▪ Water rights are becoming an increasingly attractive investment and

investors are placing more emphasis on

water rights valuation, usually preferring

third party appraisals / quality reports

before engaging

Asset Value & Water Rights

Assuming key components of the above criteria are met, Cascadia typically sees

Fully Productive (all acres online) vertically-integrated tree fruit transacting in the 8.5x

– 10.5x Forward EBITDA range

Institutional capital does not value vertically-integrated tree fruit on asset value alone

▪ Most investors take a passive approach to

the industry with minimal day-to-day

involvement in the business. They are highly concerned if management has a strong

interest in growing the business

Management has Skin in the Game

▪ Investors are highly sensitive to a grower’s ability to achieve competitive pricing

whether it be through in-house brand

power or leading sales desk membership

Marketing & Pricing Power

▪ Investors are seeking enterprises that can

be used as a platform for additional growth

and have the ability to acquire additional

acreage from which they can pack the

new fruit at above average margins

Platform / Scarcity Value

20

Agriculture Investment Strategy by Return ProfileR

etu

rn

Lower Risk Level / Upside Potential Higher

5%

-9

%10%

-1

4%

Above represents a conceptual model based on internal research and projections

IRR%

15%

-25%

+

Traditional Agriculture & Farmland Investing

➢ Returns: Cash Flow, Acreage Appreciation through

Operational Improvements and Natural Demand

➢ Key Risks: Market Risk, Leverage Risk, Operational Risk

Agricultural Enterprises

➢ Returns: Cash Flow, Acreage Appreciation through

Operational Improvements and Natural Demand, Business

Transformation & Development, Growth through Acquisition, Growth through Innovation,

Growth through New Markets

➢ Key Risks: Market Risk, Leverage Risk, Operational Risk,

Management Risk, Commodity/Pricing Risk,

Competitive Risk

Leasing Strategies

➢ Returns: Cash Flow

➢ Key Risks: Creditor Risk, Interest Rate Risk

WA State

Tree Fruit

Growing &

Packing

Platforms

21

Vertically Integrated Tree Fruit Companies

Other Production Ag, Sales Desks and Midstream Agribusiness Companies

Date Target Buyer / Investor Certainty Enterpise Value EV / Revenue EV / EBITDA Approx. Acres Approx. EV / Acres Primary Fruit

2019 FruitSmart Universal Corporation Verified $80,000,000 Confidential Confidential

2019 Firestone Pacific Foods Agriculture Capital Verified Confidential Confidential Confidential

2019 Western Polymer Ingredion Verified Confidential Confidential Confidential

2018 Old Orchard Brands LLC Lassonde Industries, Inc. Verified $158,900,000 1.5x 10.1x

Pre-2017 T&G Global Limited Golden Wing Mau Agricultural Verified $424,900,000 0.7x 8.0x

Pre-2017 Sunrise Growers SunOpta Inc. Verified $450,000,000 1.5x 11.5x

Pre-2017 Kerr Concentrates Ingredion Verified $100,000,000 1.6x 10.2x

Pre-2017 Nomad Foods Europe Holdings Limited Nomad Foods Limited Verified $2,808,000,000 1.7x 8.5x

Pre-2017 Orange-Co Alico, Inc. Verified $257,000,000 3.6x 8.6x

Pre-2017 Chiquita Brands International Sucocitrico Cutrale Ltda Verified $1,314,600,000 0.4x 13.1x

Pre-2017 Vanguard International Blue Road Capital

Pre-2017 Apple & Eve LLC Lassonde Industries, Inc. Verified $164,300,000 0.9x 10.8x

Pre-2017 Eathbound Farm LLC The WhiteWave Foods Company Verified $604,000,000 1.3x 8.1x

Mean 1.5x 10.4x

Median 1.4x 9.7x

Mean - All Available Data 1.6x 10.3x $26,772

Median - All Available Data 1.5x 10.0x $23,077

Not Applicable

Production Ag Valuation Multiples

Year Target Buyer / Investor Certainty Enterpise Value EV / Revenue EV / EBITDA Approx. Acres Approx. EV / Acres Primary Fruit

2019 Auv il Fruit Company Fiera Comox Verified Confidential Confidential Confidential 2,286 Confidential Apple

2019 Gerawan Farming Wawona Packing / Paine Schwartz Verified Stone Fruit

2019 Broetje Orchards / FirstFruits Ontario Teacher's Pension Fund Unv erified $420,000,000 6,500 $64,615 Apple

2019 Confidential Packing Plant Confidential Verified $25,000,000 Confidential Confidential Apple

2019 Yakima Fruit & Cold Storage Hancock Natural Resources Group Verified Confidential Confidential Confidential Confidential Confidential Apple

2019 Stemilt Growers Confidential Verified Confidential Confidential Confidential Apple

2019 Legacy Fruit, Valley Fruit, Larson International Farming Corp. Verified Confidential Confidential Confidential 4,000 Confidential Apple

2017 Earl Brown and Sons Foreman Fruit Verified $30,000,000 Confidential Confidential 700 $42,857 Apple

2017 Wawona Packing Paine Schwartz Partners 8,500 Stone Fruit

2017 Pride Packing Vanguard International 3,000 Apple

Pre-2017 Munger Bros Hortifruit SA Verified $160,000,000 Confidential Confidential 3,000 $53,333 Berries

Pre-2018 Okanagan Specialty Fruit Intrexon Corporation Verified $41,000,000 Confidential Confidential Confidential Confidential Apple

Pre-2019 Holtzinger Fruit Intracorp Capital Verified $30,000,000 Apple

Pre-2020 Taggares Fruit Harv ard Endowment 2,895 Apple

Mean 3.0x 9.9x $50,760

Median 3.0x 10.0x $53,333

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Variety Planted High Density Medium Density Low Density

Honeycrisp $35,000 – $50,000+ $35,000 – $40,000 $25,000 – $35,000

Fuji $25,000 – $32,000+ $20,000 – $27,000 $17,000 – $24,000

Granny Smith $22,000 – $27,000+ $20,000 – $24,000 $18,000 – $22,000

Gala $22,000 – $27,000+ $18,000 – $24,000 $16,000 – $22,000

Red Delicious $19,000 – $26,000+ $17,000 – $23,000 $15,000 – $19,000

Orchard Valuation is Influenced by Varietal Cashflow Generation Potential

Illustrative Dollar Value Per Acre Planted

Figures presented may vary and are impacted by geographic location, proximity to key facilities, underlying water rights and other factors

23

WA Tree Fruit Farmland Only Transactions

WA Tree Fruit Farmland Values

Date Target Buyer / Investor Certainty Purchase Price Approx. Acres Approx. PP / Acres Primary Fruit

2019 Confidential Confidential Verified $2,505,000 159 $15,755 Unplanted

2019 Confidential Confidential Verified $3,650,000 158 $23,101 Apple






2018 Confidential Confidential Verified $170,782,295 16,623 $10,274 Unplanted


2018 Confidential Confidential Verified $450,000 10 $45,000 Apple















Mean $22,209

Median $20,631

24

Cascadia Capital

25

Cascadia Capital Overview

Headquartered in Seattle, with Managing Directors in Los Angeles, Minneapolis and

New York

We have completed hundreds of M&A transactions ranging in size from $20-$500 million. Our thorough and disciplined process, in combination with our deep industry expertise, has resulted in a proven track record of delivering successful outcomes for our clients.

We have extensive experience placing equity and debt capital ranging from $10-$250 million. We leverage our deep relationships with institutional investors; including private equity, growth equity, venture capital, family office, mezzanine and venture debt, hedge funds and BDCs.

We provide our clients with analytical data and insights to facilitate strategic decision-making. We advise our clients on how to maximize shareholder value and then provide support for transaction implementation.

PR IVATE

CAP ITAL

MERGERS &

ACQUIS I T IONS

CORPORATE

F INANCE

STRATE G IC

ADVISORY

SE RV ICE S

We listen carefully to business owners and managers and then work closely with them to custom design long-term and flexible capital solutions. Our approach resonates particularly well with family-owned and closely-held companies.

E N G A G E M E N T S I N C L U D E :

• Mergers & Acquisitions (Buy & Sell Side)

• Corporate Divestitures

• Management Buyouts

• Leveraged Buyouts

• Recapitalizations

• Partial Liquidity Events

• Private Equity Capital Raises

• Public Company Capital Raises

• Debt Financings & Restructurings

• Project Finance

• Valuations

• Fairness Opinions

• Shareholder Rights Planning

• Shareholder Value Analysis

• Strategic Alternatives Reviews

• Strategic Partnerships & Joint Ventures

• Special Situations

$9+ billion in total M&A transactions closed in the firm’s history

$3+ billion in total capital raised in the firm’s history

Founded in 1999Cascadia has a successful 20-year history

50+

15

OVER

350

Investment Banking Professionals

Managing Directors in Four Cities

Transactions Completed, with more than $12.3 Billion in Aggregate Value

26

Andrew Raphaelson

Associate

Food and Agribusiness

Experience:

3+ years finance

1+ year with Cascadia

Industry Focus:

AgTech, Agribusiness

Inputs and Production,

Food Processing &

Manufacturing

Agribusiness Advisory Team – Select Members

Michael Butler

Co-Founder and CEO


Experience:

30+ years banking

20+ years with Cascadia

Industry Focus:

AgTech, Food &

Agriculture,

Agribusiness Inputs and

Production, Equipment

Manufacturing

George Sent

Managing Director


Experience:

15+ years banking


4+ years Executive at

Smucker’s

Industry Focus:

Branded Food &

Nutrition, Ingredients,


Production

Jim Munyon

Senior Advisor


Experience:

30+ years food

operating exp. at Nestle,

Simplot, and AIB Intl.


Industry Focus:

AgTech, Ingredients,

Food & Agriculture,


Production, Equipment

Manufacturing

Sam Brar

Associate


Experience:

3+ years banking


Industry Focus:



Food Processing &

Manufacturing

Selected Client Work: Selected Client Work: Selected Client Work: Selected Client Work: Selected Client Work: Selected Client Work:

ProjectProject Apollo

Sell-side M&A Process

Asher Nelson

Analyst


Experience:

2+ years banking


Industry Focus:



Food Processing &

Manufacturing

Scott Porter

Senior Vice President


Experience:

10+ years banking


Industry Focus:

AgTech, Ingredients,


Production, Food

Processing &

Manufacturing

Selected Client Work:

27

National Leader in Food, Beverage & Agribusiness

January 2020

*Completed by a Cascadia banker at a prior firm

*

28

Proven Results – Most Recent Transactions

washington tree fruit industry - leading middle market ... · long-term macro trends are favorable...

Documents