Are SPACs Back? Above Foods To Go Public

Vertically-integrated ingredient supplier, agriculture company and CPG producer Above Foods will go public via a reverse merger with blank check company Bite Acquisition Corp. The deal is expected to be complete by the end of 2023, according to Bite.

Above’s draw is its unique operating model and category breadth, according to Bite executives during a call with investors Monday morning.

“[The company] leverages its own source of supply and distribution infrastructure to create higher value formulations and products for the benefit of downstream customers,” said Alberto Ardura, Chair and CEO of Bite Acquisition Corp, on the call. “This Seed-to-Fork platform allows for unique synergies…and we expect that Above Food will drive significant revenue, EBITDA and margin growth for the many years to come.”

The business had $294 million in revenue for the trailing twelve months of the year ending January 31, 2023, with a consolidated gross margin of roughly 4% and adjusted EBITDA margin of 1%. The deal values Above at roughly $319 million, roughly .66 times its expected 2024 revenue of $482 million. The company is also expected to be EBITDA positive by the end of fiscal year 2023.

When the deal closes, Above will begin trading on the New York Stock Exchange (NYSE) under the ticker symbol ABVE, and is expected to net roughly $44 million of gross proceeds; $9 million of those proceeds are already committed to fund “future facility development and working capital purposes.” Following the close of the transaction, Above shareholders, including its management team, will remain majority shareholders of the publicly traded company, owning roughly 70%.

Special purpose acquisition company (SPAC), Bite, is led by CEO Alberto Ardura. The SPAC’s strategic investors include Mexico-based Lexington Capital and oat manufacturer Grupo Vida. It began trading on the NYSE under the symbol BITE in Feb 2021, raising $200 million, with a target of a “better for you” and “better for the earth” company that operated across the food value chain.

Founded in 2019, Canada-based Above Foods has three areas of focus: “Disruptive agriculture,” specialty ingredient production and sales; and consumer products, which encompass both private label and branded products. The agriculture division includes seed genomics, plant nutrition and equipment technology and is managed by its wholly-owned subsidiary Discovery EARTH Sciences.

Its portfolio of plant-based products includes plant-based brands across categories including Culcherd, Eat Up!, New Ocean and Farmer Direct Organic. Above’s growth strategy has been rooted in acquisitions rather than incubating new businesses from scratch.

In tandem with the public listing, Above will acquire the entirety of Atlantic Natural Foods, the makers of Loma Linda, Neat and TUNO plant-based offerings. Above became a “significant” shareholder in Atlantic in 2021.

Across that portfolio, Above sells 120 products in over 35,000 retail points of distribution and its ingredients division supports over 250 clients. Meanwhile, its facilities are capable of producing $650 million in revenue per year, double the income produced during its latest full fiscal year, ending January 2023, executives said. Through pre-existing contracts with farmers the company also has access to 30,000 acres of regenerative farmland in the U.S. and Western Canada.

Above’s growing and processing capabilities and facilities are core to its success, executives said on the call. Currently its growers supply 90% of the grain used by the company’s ingredients division and 50% of the ingredients utilized in its CPG products.

“Direct access to high-quality production provides supply certainty and serves as the basis for our value-added ingredients business,” said Above CEO and chairman Lionel Kambeitz, yesterday. “Our vertical integration and control of the value chain manifests in greater control over supply chain risks and costs, enabling greater control of our margins.”

Currently the company’s revenue comes primarily from its agriculture business (61%) while its ingredient business and CPG goods account for 37% and 2% of revenue, respectively. The goal, executives shared on the call, is to “leverage [their] access to plant-proteins and grains” to increase sales of its ingredient and CPG products, ultimately achieving a more evenly distributed mix among the three revenue streams. Shifting this ratio will also help grow gross margins and executives expect the CPG business will achieve a 31% gross margin by the end of the current fiscal year in January 2024.

In 2020 and 2021 a spate of CPG and ag-tech focused SPACs began trading, with investment firms VMG, AF, Siddhi Capital, CAVU and HumanC0 all announcing blank check companies. Despite the interest, however, none of these SPACs have acquired targets to-date. Meanwhile, CPG brands Stryve Foods, Tattooed Chef and Laird Superfood, which merged with blank check companies in 2021 and 2020, have struggled to meet investor expectations.