Is Antin’s latest deal infra, agriculture or somewhere in between?

Aquaculture is enjoying strong tailwinds – and has been for several years. The sector reached a milestone in 2016, when people ate more farmed than wild-caught fish. Global production has been growing at an annual rate of 6 percent since 2011.

Accordingly, private investors have been sinking millions into the sector. Andromeda, a portfolio company of agri-focused PE firm Amerra, in June joined forces with Abu Dhabi’s Mubadala to buy a pair of Greek sea bass and sea bream producers. South Africa’s Exeo Capital acquired a seafood farming venture in February; Canada’s Ontario Teachers’ Pension Plan purchased a mussel producer in November.

All these firms are very clear that they view aquaculture, if not as an integral part of agriculture, then very similar to it. And yet, last week, Paris and London-based Antin Infrastructure Partners announced its impending acquisition of Norway-based Sølvtrans, the world’s largest wellboat company for the transport of live salmon and trout. Does the asset really belong to infrastructure – or is it closer to agriculture?

Sølvtrans, located midstream in the supply chain, is not an actual fish farm. A source close to Antin assured us the company is not exposed to the price of salmon, as it just transports it. We also understand its revenue is secured through long-term contracts, and that Sølvtrans is endowed with a serious stock of tangible assets (the boats). Take all this together, the argument goes, and the company ticks many of the boxes you’d expect of an infrastructure asset (stable revenue, asset-backed, quasi-monopolistic situation).

But just because it is a market leader, it doesn’t mean Sølvtrans’ position is as secure as an essential infrastructure asset with a guaranteed offtake. The company does face competition. It is also, arguably, indirectly exposed to the salmon industry’s fortunes (if there is less to transport, its business dwindles). And, while aquaculture is buoyed by “strong underlying drivers”, as Antin managing partner Mark Crosbie says, no sector is immune to sudden shocks (and certainly not food production – think regulation, trade and scandals). Sølvtrans’ counterparties could also fall victim to internal problems (and it’s hard to argue that fish farmers are too big to fail, as major utilities tend to be).

We’re not arguing any of this is likely (it probably isn’t). But the very fact that these risk factors exist is enough to challenge Sølvtrans’ classification under the infrastructure label. Oaktree – the company’s current majority shareholder – certainly didn’t describe Sølvtrans as such when it bought it in 2014. Offer documents suggest the asset belongs to OCM Luxembourg EPF III, itself owned by Oaktree European Principal Fund III and related entities. In US pension documents seen by Agri Investor, that fund is described as focusing on distressed debt and restructurings.

Of course, the company is now a different beast. Its fleet nearly doubled in the interim, thanks, in part, to the acquisition of a rival in 2015. But we think it looks more like a sizeable agribusiness than an infrastructure asset, and this deal strikes us more as a private equity deal than a quest for recurrent yield with potential for capital gain.

Antin has always been transparent about its private equity approach to investing in infrastructure. It is also not the first time it has backed assets most peers hesitate to count as infrastructure – at least initially – including motorway service areas, test labs and crematoria (among others). Returns have been good so far, and LPs don’t seem to mind that boundaries are being stretched. Let’s hope its investment in Sølvtrans goes swimmingly.