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IPO Report: Taggares Agriculture (TAG)

By  +Follow June 26, 2014 3:32AM
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Taggares Agriculture IPO, IPO, IPO report, Taggares Agriculture IPO report, small-cap stocks, stocks to buy now, IPOs today Taggares Agriculture ($TAG) was formed in January 2014 to leverage the well-established Taggares family name and farming expertise to acquire, re-develop and operate profitable farmland in the Pacific Northwest. It is headquartered in Kennewick, WA.

Fourteen other companies are scheduled for the week of June 23, 2014. The complete IPO calendar is available at IPOpremium.

The manager and co-managers are Janney Montgomery Scott/ ROTH Capital Partners. The joint manager is Feltl and Company.

TAG scheduled a $46 million IPO with a market capitalization of $54 million at a price range midpoint of $6.50 for the week of June 23, 2014 on the Nasdaq. SEC filings

Taggares Agriculture IPO Report

Overview

TAG was formed in January 2014 to leverage the well-established Taggares family name and farming expertise to acquire, re-develop and operate profitable farmland in the Pacific Northwest (the region encompassing Washington, Oregon and Idaho).

TAG will be selling 86% of the company, with the proceeds going  to acquire apple and grape farmland.

Valuation

Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Using fiscal 2013 because seasonal

     

Taggares Agriculture (TAG)

$54

7.0

6.7

1.2

1.3

86%

             

Conclusion

Based on the year ended November 2013 the P/E is  6.7, but it's a stable farmland business where growth can only come from acquisitions.

The rating is neutral.

Business

TAG was formed in January 2014 to leverage the well-established Taggares family name and farming expertise to acquire, re-develop and operate profitable farmland in the Pacific Northwest (the region encompassing Washington, Oregon and Idaho).

Existing Operations 

TAG was founded in January 2014 and currently has no revenue-generating business operations.

However, TAG has already taken numerous steps to position Taggares Agriculture Corp. for future growth, including negotiating the contractual right to acquire the real property, certain personal property, business operations, water and other rights related to the real property (the “Business and Assets”) of Snake River Vineyards (“SRV”), an apple and grape farm located on the Snake River in Burbank, Wash. that encompasses a total of approximately 3,200 acres.

In addition, TAG has entered into new strategic partnerships, including a five-year contract with Tree Top, Inc. with market-rate pricing terms; negotiated a non-binding letter of intent to enter into a three-year packing agreement with Valicoff that includes a per-bin handling rebate and otherwise market-rate pricing terms; developed detailed farm acquisition and re-development strategies as described in the SEC filing; and established a high-quality management team and board of directors with significant experience and expertise in real estate, investing and agriculture.

TAG’s primary focus is on acquiring farmland with the necessary characteristics to grow differentiated permanent crops that are profitable to its business such as tree fruit (e.g. apples), stone fruit (e.g. cherries, nectarines and pears) and grapes (e.g. concord and wine grapes).

These characteristics include an established permanent crop, secure water rights, re-development potential, large contiguous area, existing operations, and consistent yields.

In addition, capitalizing on the extensive experience of its management, consultants and advisors, TAG intends to use value-enhancing farming techniques to increase the yield of its crops, such as advanced pruning and thinning techniques, frost prevention such as ponds and wind machines, and other infrastructure improvements.

Further, TAG plans to establish partnerships to improve its economies of scale, such as those with Valicoff, the apple packing shed that will pack, store, distribute, market and sell its apples.

Acquisition strategy

TAG’s acquisition strategy will commence immediately after this offering, but will continue over the next two to five years and, will require it to obtain additional financing, accurately identify attractive property, compete effectively with other potential buyers of farmland and successfully integrate and operate these new properties.

Although TAG anticipates launching its re-development strategy upon completion of its acquisition of the Business and Assets of SRV, TAG will not realize certain benefits of these efforts for up to two to five years, if at all, and such improvements may require TAG to incur debt in the future.

Dividend Policy

No dividends are planned.

Competition

Competition in the grape and apple industries in Washington and internationally is intense.

SRV faces direct competition by other grape and apple companies, including small family-owned businesses, as well as subsidiaries or other affiliates of large companies, some of which have substantially greater resources than TAG does.

SRV’s principal competitors in the Pacific Northwest concord grape industry are The J.M. Smucker Company (SJM) and affiliated entities and Milne Fruit Products, Inc. and affiliated entities.

The Washington apple industry is comprised of hundreds of small, independently and family-owned farms, none of which have significant market share to constitute any particular competitive advantage.

5% stockholders pre-IPO

T3 Ag Investments, LLC            54.2%

Peter J. Taggares IV Irrevocable Trust    25.8%  

Peter John Taggares III & Sandra Kay Taggares 15.5%

Use of proceeds

TAG expects to net $42 million from its IPO. Proceeds are allocated as follows:

Acquisition of Business and Assets of SRV J.V. (See “Related Party Transactions and Structure of the Company and Related Parties” beginning on page 90) less deposit of $133,000 already paid                                                                                                      $29,167,000

Acquisition of land and related assets from Bubby T, LLC                      $700,000          

Estimated payment for 2014 in-progress crop costs                              $864,000                       

Payment for accrued liabilities incurred for offering costs                                  $249,000                       

Future acquisitions of agricultural properties consistent with its business strategy            $7,362,000

Re-development of portions of its land for new apple varieties, including the purchase of new apple plants                      $1,000,000 

Repayment of debt owing to a related party                                          $550,000                                 

Replacement of equipment, building new facilities and upgrading technology                         $1,000,000   

General corporate and working capital purposes                                    $1,000,000

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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By  +Follow June 26, 2014 3:32AM
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