Grovepoint invests in Israeli microalgae(2)

The London-based firm, created in 2010 as a principal investor, hopes to tap the growing global appetite for health and nutrition products.

Grovepoint Capital, the UK private investment company, has acquired a majority stake in Israeli microalgae producer Algatechnologies. 

No value has been disclosed for the transaction, but a source with knowledge of the matter said it could be close to $50 million. 

Based in Israel’s Arava desert, Algatech has developed proprietary technology that allows it to cultivate microalgae on a large scale, in more than 300km of glass tubing. The algae are used to produce a molecule called astaxanthin, allegedly the most powerful antioxidant available for human consumption. 

The company occupies an appealing niche in the fast-growing “nutraceutical” market, Leon Blitz, co-founder of Grovepoint, told Private Equity International. “At the moment, the whole wellness market is desperately keen to consume natural products derived from microalgae, as they are known to be a rich source of nutritional benefits. The key product we have here has been well supported by nutraceutical companies in Japan, the US and increasingly Europe.”

Algatech specialises in
the commercial cultivation
of  microalgae

Astaxanthin is the dark red pigment found in aquatic organisms which gives crustaceans, shell fish, salmon and flamingos their distinctive red/pink colouring. It is particularly suited to the needs of ageing populations in the Western world, the company claims, having demonstrated its potential role in supporting immune systems and strengthening joint, skin and muscle health functions through clinical studies. 

Algatech is one of the many interesting, niche companies started by the country’s kibbutz – Israel’s collective farms – which had done a good job at nurturing innovation but lacked the funds and expertise to internationalise their business, Blitz explained. Its owners, comprising the Ketura kibbutz and an English charity called JCA, had recently been looking for external support to take it to its next stage of growth. 

“The product demand currently exceeds that which Algatech can produce and it is our intention to invest in the business to help it grow its capacity and distribution in both existing and new algae-based products .” 

Algatech is Grovepoint’s fifth deal since its founding. Previous transactions have included the £350 million acquisition of Total’s UK downstream assets, made through a consortium with fuel retailer Snax 24 and Investec Bank, as well as a number of industrial businesses. The firm has been involved in close to $1 billion worth of investments since inception. 

It has mainly focused on providing growth capital, as well as entrepreneurial know-how, to investees located in developed as well as emerging markets. It has no predefined sector focus, apart from growth markets where its expertise lies in the agriculture, farming and water industries.

The firm, founded in 2010 by Bradley Fried and Leon Blitz, two formers Investec partners, raises capital on a deal-by-deal basis.  Its LP base is primarily composed of family offices.