Fox Paine harvests gold from seeds

The San Francisco investment firm has agreed to sell Seminis, a producer of fruit and vegetable seeds, for $1.4bn, more than double what it paid for the business eighteen months ago.

San Francisco-based private equity firm Fox Paine has agreed to sell portfolio company Seminis, a producer of vegetable and fruit seeds, to agricultural giant Monsanto in a transaction valued at approximately $1.4 billion (€1.1 billion).

The deal is expected to close in the first half of 2005.

The private equity firm first acquired Seminis in June 2003 in a deal valued at roughly $650 million, investing $163 million of equity for 75 percent ownership of the company. Alfonso Romo Garza, the chairman and chief executive officer of Seminis, and other members of management retained the balance.

Fox Paine managing director Kevin Schwartz noted that, while the firm wouldn’t disclose return data, the Seminis investment had been “very profitable”.

Under the terms of the current deal, Monsanto will pay $1 billion in cash to Seminis shareholders and assume approximately $400 million in debt. The transaction also includes a payment of $125 million, contingent on certain performance benchmarks, due by the end of fiscal 2007.

Fox Paine has been an active player in the agri-business sector, an industry, according to Schwartz, characterized by high profitability, high barriers to entry and limited interest from other private equity investors. In May 2004, the firm, in conjunction with agrochemical company Sygenta, acquired seed producer Advanta BV in a deal valued at approximately $475 million. Schwarz also noted that Dexter Paine, a co-founder of the firm, had invested in the industry while he was a partner at buyout shop Kohlberg & Co.

Fox Paine was founded in 1997 by Paine and former KKR partner Saul Fox. The investment in Seminis was made from Fox Paine Capital Fund II, a $1 billion fund that closed in 2000.