Soros-Backed Adecoagro Raises $314 Million in IPO

Adecoagro SA, the South American farmland venture backed by billionaire investor George Soros, raised $314 million from its U.S. initial public offering after pricing the shares at the bottom of the range.

The Luxembourg-based company sold 28.57 million shares at $11 apiece, after earlier today cutting the range to between $11 and $12, according to Bloomberg data. That’s down from a previous plan to sell the shares at as much as $15 each.

The initial offering comes as commodity prices rally and food prices reach record highs. Adecoagro produces sugar, coffee, soybeans, corn, rice and milk in farms in Brazil, Argentina and Uruguay. Proceeds will be used to build a sugar and ethanol processing plant in Brazil and to buy farmland.

Adecoagro added 9.1 percent to close at $12.00 in New York Stock Exchange composite trading.

“The problem with Adecoagro is that it is a new company, people are not familiar with it and, as a consequence, I think the initial price range was quite high,” Kristof Bulkai, a fund manager at Thames River Capital LLP in London said today in a telephone interview. He plans to buy a “large stake.”

Adecoagro’s shareholders include Pampas Humedas LLC, an affiliate of Soros Fund Management LLC, which owns about 33 percent and plans to reduce its stake in the company to about 21 percent after the offering, according to the filing.

Zurich-based Credit Suisse Group AG, New York-based Morgan Stanley and Itau Unibanco Holding SA in Sao Paulo are leading the offer, according to the prospectus.

Qatar Holding

Qatar Holding LLC, the investment arm of the Qatar Investment Authority, the Persian Gulf state’s sovereign wealth fund, agreed to buy stock equal to about 25 percent of proceeds.

“If we like it, we like it at a lower valuation because we need to have some upside,” Thames River’s Bulkai said. “There was just not a lot of clarity” on future earnings, he said.

The sugar-mill will process about 11 million tons of sugar cane a year and will be one of the biggest in Brazil, according to Adecoagro’s website. The total cost of the mill is $1 billion. About $690 million is needed to complete the mill, Adecoagro said in its SEC filing.

Investors should “avoid the initial public offering and consider opportunistic purchases” in the future, once there is “clarity on restrictions against foreign ownership of Brazilian farmland,” Michael Fritz, an analyst with Monona, Wisconsin, based-Mercador Research LLC, said today in an e-mailed note to clients.

Food Shortage

Brazil is the world’s largest exporter of coffee and sugar, the second-largest soybean producer and the third-largest exporter of corn. Argentina is the second-largest corn shipper and the third-largest grower of soybeans.

Investing in Adecoagro is “a way to play the potential global shortage of food, especially in emerging markets,” Francis Gaskins, president of Marina del Rey, California-based IPOdesktop.com, said in a note today.

Higher commodity prices are leading to riots, demonstrations and political instability, Nouriel Roubini, the New York University economics professor who predicted the financial crisis, said at the World Economic Forum in Davos, Switzerland earlier this week.

To contact the reporter on this story: Lee Spears in New York at lspears3@bloomberg.net; Rodrigo Orihuela in Buenos Aires at rorihuela@bloomberg.net

To contact the editor responsible for this story: Daniel Hauck at dhauck1@bloomberg.net; Dale Crofts at dcrofts@bloomberg.net

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