How Neame Lea private equity funding could change the growing business

One of Britain's biggest growers is the latest to attract private equity funding, and the £30m could bring new markets and technologies to the industry.

Bridge Farm Nurseries managing director David Ball - image: Bridge Farm Nurseries
Bridge Farm Nurseries managing director David Ball - image: Bridge Farm Nurseries

NorthEdge Capital has invested £30m in Bridge Farm Nurseries, which will make it the biggest single producer of ornamental plants, flowers and herbs in the UK, backing a management buyout from its family shareholders.

Founded in 1988 and headquartered in Spalding in Lincolnshire, Bridge Farm works with UK supermarkets and garden centres under the brand name Neame Lea, and is the 2017 UK Grower of the Year. It has a projected £40m turnover for 2017, and vies with Newey Thinking to be the UK's biggest grower.

NorthEdge Capital say supermarkets see outdoor plants, flowers and herbs "of increasing importance as a category". Bridge Farm’s core supermarket customer base, which includes Tesco and Aldi, is "growing faster than the overall market as supermarkets increase garden ranges targeting shoppers buying for convenience or on impulse, and accordingly securing a greater share of the market".

The business operates from five locations around Spalding, including its flagship site at Horseshoe Road. The company has a skilled and semi-skilled workforce of over 500 employees at peak time. Horsehoe Lane underwent a £10m expansion two years ago, adding glasshouse infrastructure and biomass heating to become "the lowest cost producer in the industry". NorthEdge’s investment will allow the management team to continue this capital expenditure programme, tripling its capacity and developing further its highly differentiated market proposition. Neame Lea plan an additional much larger automated facility.

The nursery has spent £12m in three years on development. It sees the biggest area of growth is in new product development within the fresh sector, particularly growing herbs, microgreens and living salads. Under Ball, Richard Priestley runs Neame Lea Fresh, which formed after Neame Lea took over JVG Herbs in 2016. Juices, potted chillies, herbal teas, lesser-grown herbs such as lemongrass Vietnamese coriander, pesto basil, and Rungia and living salads already trialled at Aldi are all new.

Managing director David Ball said: "The deal is a fantastic opportunity for myself and the management team to accelerate growth and take the business on to the next step of its journey. We’ve seen the importance of investment during what is a challenging time within the industry, and we want to maintain this investment and build on the great work that the team has achieved. The key focus of the business will be on increasing our UK production across plants, flowers and herbs, whilst ensuring we operate an extremely streamline and efficient business so that we can deliver maximum value for our customers and be a long term partner for our suppliers.

"Our business is all about people, and that was the big driver for us in deciding to work alongside NorthEdge Capital as they have a fantastic, down-to-earth team that are there to help support the business to deliver its growth plan. Rob Freer and Andy Skinner will provide huge support and guidance to our management team, whilst Clive Sharpe has an exceptional track record within the food manufacturing industry and working with our core supermarket customers. The deal will allow my parents, who have been hugely supportive through the growth of the business in the last few years, to enjoy their retirement, whilst allowing the business to continue to develop the business and take advantage of the many opportunities we see in the market."

In August 2016, Neame Lea and Zyon UK announced a deal to enable Zyon UK to exclusively market Neame Lea’s ornamental plant production. enabling customers to "efficiently source both UK and European plants, flowers and added value from one point of contact".

The move gave a combined UK turnover of £35m in addition to the Zyon Group's €50m turnover in Europe and produced the largest grower-packer operation in the UK.

Private equity has been active in the horticulture industry, with Scotts Europe sold to Exponent Private Equity in a $250m transaction with the deal that went through this summer and Newcore Capital Management buying Yarnton Nurseries near Oxford for £10.3m in March. And US-multinational conglomerate holding company Griffon Corporation bought UK outdoor living supplier La Hacienda for £8.5m ($11m) this July.

Scotts' veteran John Ashley says having spent this sort of money, the investors must be sure they will get a good return. He has questioned Exponent about seasonality of gardening. Exponent says as owners of the open-topped tourist attraction Big Bus Tours, they recognise and are prepared for weather fluctuations in business. This could relate to how Neame Lea will diversify into more indoor herbs and flowers in the future.

Midlothian Capital Partners joined with Hattington Capital to buy Dobbies from Tesco for £217m in 2016. Terra Firma bought Wyevale in 2012 for £276m. In September 2015, BlackRock Real Estate bought a portfolio of eight garden centres in the BlackRock UK Long Lease Property Fund from LaSalle Investment Management for £112.5m.

But investing in growers is a newer direction for private equity, with the large group garden centre market well-exploited. They could be buying British assets because of Brexit and because the rest of the world is going through an unsettled phase.

The UK's biggest grower, Newey Thinking, plans to add £20m to its £40m-plus turnover before the end of 2018, showing how ambition, investment and consolidation is making the biggest in the market bigger and more influential.

NorthEdge manages £540m of funds and has made 20 investments since 2012, including in discount toilet roll business Accrol Papers and pawnbroker Ramsdens, both of which have recently floated on the London Stock Exchange and show how private equity is interested in alternative investments that can grow in value in unfashionable but potentially lucrative markets.

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