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Sunday, 31 January 2016 21:25

PE firm acquires New Mission Organics hop farm in Northern Michigan

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New Mission Organics New Mission Organics COURTESY PHOTO

OMENA — After a decade of steady growth, one Northern Michigan hop farm and processing company plans to ramp up its operations with an injection of capital from an in-state private equity firm.

Brian and Amy Tennis, co-owners of Omena-based New Mission Organics LLC in Leelanau County north of Traverse City, recently closed on a deal with private equity firm Streetcar Management Partners LLC, which will now hold a majority stake in the company.

The acquisition will allow Tennis to focus on the agricultural side of the business as Commerce Township-based Streetcar concentrates on managing all other aspects of the company.

“We will have a CFO and human resource department overnight,” Brain Tennis said. “We were willing to give up control to grow that pie and have a much larger pie at the end of the day.”

New Mission will merge into the Michigan Hop Alliance, a hop processing operation the Tennises also founded, as a result of the acquisition. The resulting entity will be housed within Streetcar’s operations.

Terms of the transaction were not disclosed.

With the renewed focus and an injection of capital, Michigan Hop Alliance plans to add acreage to its 65-acre operation and expand with new hop varieties, including “weird” options from New Zealand and Japan, Tennis said.

The company expects to plant an additional 35 acres this spring, with the idea of doubling in size again within the next two years, he said.

[RELATED: Consolidation spreads to the beer supply chain]

The deal came about after New Mission passed on advances from other outside investors over the years, Tennis said. The reason: Most of those investors were “extremely wealthy but didn’t want to do anything with the business,” he said.

The Tennises found a different perspective when they approached Streetcar Management. The two parties developed a relationship as the PE firm developed on a brewery project in Northern Michigan and the partnership developed from there.

“These guys are truly businesspeople and a hell of a lot of fun to work with,” Tennis told MiBiz. “Those two characteristics sold the deal. At the end of the day, we want to sit down and be able to have a beer with our partners. You can find money anywhere.”

For Streetcar, the acquisition comes as the company looks to enter the rapidly expanding hop industry in Michigan, said Michael Collins, a principal with the private equity firm.

“We just see the huge potential for growing hops in Michigan,” Collins said. “It is such a big craft beer state … and we want to be part of that growth.”

The firm is developing the 80-acre Baia Estate, an immature vineyard and winery in Northport, Mich., where the firm aims to add an orchard for hard cider production and a brewery and hopyard. Streetcar also owns a stake in American Expedition Vehicles, a Wixom-based Jeep customizer and coachbuilder, and is in the process of developing real estate projects in the Detroit area.


A CONSOLIDATING INDUSTRY

Streetcar’s acquisition of New Mission underscores a larger trend of consolidation in Michigan’s agricultural industry, particularly among hops suppliers in the small-but-growing craft beverage supply chain.

As the state’s nascent hop industry continues to expand, it’s attracting the attention of outside investors, including private equity firms such as Streetcar. Some experts also predict that hop growers and brokers from the Pacific Northwest will be drawn to farms in Michigan as they seek to diversify their operations and hedge against weather-related issues, as MiBiz previously reported.

For growers, consolidation may become necessary to maintain a viable business model and grow at the scale required to support the state’s beer industry, Tennis said.

[RELATED: Michigan’s craft beverage industry could prove attractive for acquisitions]

“You can’t get by with a couple of acres anymore,” Tennis said. “It’s a wakeup call for everyone in the industry because you need to get the economy of scale. You have to get the price point down for the breweries to be able to afford.”

That need for scale also drove a December 2014 deal involving Hickory Corners-based Hop Head Farms LLC, which was acquired by Ceres Partners LLC, a South Bend, Ind.-based private equity firm. The grower and processor of hops has been in expansion mode ever since the acquisition.

In the first quarter of this year, Hop Head Farms expects to wrap up deals to bring its holdings to 530 acres of hop farms. The company also will complete its second processing facility in Baroda later this year, according to Perry Vieth, the president of Ceres and an original investor in Hop Head.

That’s a far cry from the original 40 acres Hop Head Farms started with, and well beyond the founders’ initial plans to get to 80 to 100 acres, Vieth told MiBiz for a previous report.

“We needed to get to this scale to give us the economies we wanted,” Vieth said.

Hop Head Farms also has plans to add a third processing facility in Paw Paw by 2017.

Because of the demand for Michigan hops, Collins of Streetcar predicts that the pace of mergers and acquisitions in the hop industry will increase as growers in the state continue to expand.

“I think you’re going to see the consolidation of a lot of mom-and-pop growers,” Collins said. “Now people are looking at this as a real business, and you need scale.”

Read 5311 times Last modified on Sunday, 31 January 2016 21:43

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