BTG Pactual announced that a consortium led by its Timberland Investment Group (TIG), along with British Columbia Investment Management Corporation (BCI), one of Canada’s largest institutional investors, and APG, one of the world’s largest pension providers, has agreed to acquire Chilean timberland asset from Arauco for US$385.5 million.
The transaction is comprised of approximately 80,500 hectares of high-quality, sustainably-managed timberlands in the central and southern regions of Chile and will establish the consortium’s timberland presence in the country.
The acquisition supports the consortium’s strategy of investing in timberland assets around the world that can achieve compelling investment returns, while applying high standards of environmental and social governance. The timberlands in this transaction have all been certified with Arauco by the Forest Stewardship Council (FSC).
Gerrity Lansing, Head of TIG and MD Partner at BTG Pactual, added: “The Timberland Investment Group has been searching for an opportunity to establish our presence in Chile for more than a decade. This transaction offers both the scale and high-sustainability requirements we’ve been looking for and we are pleased to be investing alongside BCI and APG, two of the world’s leading institutional investors.”
Lincoln Webb, Executive Vice President and Global Head, Infrastructure & Renewable Resources at BCI added: “As an active investor, we are excited by the opportunity to expand our global infrastructure and renewable resources program in Latin America with trusted partners. The investment provides compelling risk-adjusted returns for our pension plan and insurance fund clients, and increases our exposure to high-quality, sustainably managed forests.”
“This transaction not only helps us realize profitable and long-term returns for our pension fund client ABP and their participants, it also matches our ambition to partner with like-minded investors to make investments that contribute to the UN Sustainable Development Goals”, added Vittor Cancian, Senior Portfolio Manager at APG, “The timberland assets we are buying are all certified under Arauco’s group FSC certification to ensure that they are being managed in a way that is environmentally responsible, preserves biological diversity and benefits the lives of local people and workers. The FSC system also allows businesses and consumers to identify, purchase and use wood, paper and other forest products made with materials from well-managed forests or recycled sources.”
The transaction is subject to customary closing conditions, including antitrust approvals, and is expected to close in the third quarter of 2021.
ADDITIONAL INFORMATION
ABOUT BTG PACTUAL TIMBERLAND INVESTMENT GROUP
BTG Pactual (BPAC11) is the largest investment bank in Latin America, operating in the Investment Banking, Corporate Lending, Sales & Trading, Wealth Management and Asset Management markets. BTG Pactual Asset Management has an international presence with over US$70 billion in assets under management and administration. BTG Pactual Timberland Investment Group (TIG), a division of BTG Pactual Asset Management, is one of the world’s oldest and largest timberland investment managers with nearly US$ 4 billion in assets and commitments and 2.6 million acres under management globally. TIG is focused on achieving compelling investment returns while also applying high standards of environmental and social governance, and has a 40+ year track record with over 100 professional staff members in 16 offices around the globe, bringing local, regional, and global experience to bear on the management of client investments. www.timberlandinvestmentgroup.com.
ABOUT BCI
With C$171.3 billion of assets under management as of March 31, 2020, British Columbia Investment Management Corporation (BCI) is one of Canada’s largest institutional investors. Based in Victoria, British Columbia, BCI is a long-term investor that invests across a range of asset classes: fixed income; public equities; private equity; infrastructure; renewable resources; real estate; and commercial mortgages. BCI’s clients include public sector pension plans, insurance, and special purpose funds. BCI’s infrastructure & renewable resources program, valued at over C$18.3 billion, invests in tangible long-life assets that include a portfolio of direct investments in companies across a variety of sectors spanning regulated utilities, energy, telecommunications, and transportation, as well as investments in timberlands and agri-businesses. These companies operate in stable and mature regulatory environments, provide opportunities for future capital investments, and have the potential to generate steady returns and cash yields for our clients. The program is diversified across North America, Asia, Australia, Europe, and South America.
ABOUT APG
As the largest pension provider in the Netherlands, APG looks after the pensions of 4.7 million participants. APG provides executive consultancy, asset management, pension administration, pension communication and employer services. We work for pension funds and employers in the sectors of education, government, construction, cleaning, housing associations, sheltered employment organizations, medical specialists, and architects. APG manages approximately €577 billion in pension assets. With approximately 3,000 employees we work from Heerlen, Amsterdam, Brussels, New York, Hong Kong, Shanghai and Beijing. For more information, please visit www.apg.nl.
This is actually a huge deal for APG, BCI and BTG Pactual, so it's worth spending some time on it.
First, SWFI also reported on this deal:
Celulosa Arauco y Constitución (Arauco) is a Chilean wood pulp, engineered wood, and forestry company controlled by Anacleto Angelini’s economic group Empresas Copec S.A. (99.97805% ownership). Roberto Angelini Rossi and Patricia Angelini Rossi own Empresas Copec S.A.
Arauco sold approximately 80,500 hectares of timberlands in the central and southern regions of Chile for US$ 385.5 million from an investor group. The investor group is led by BTG Pactual’s Timberland Investment Group (TIG). Other investors in the consortium include British Columbia Investment Management Corporation (BCI) and APG Asset Management. The timberlands in this transaction have all been certified with Arauco by the Forest Stewardship Council (FSC).
The Timberland Investment Group has been searching for an opportunity to establish our presence in Chile for more than a decade.
The transaction is subject to customary closing conditions, including antitrust approvals, and is expected to close in the third quarter of 2021.
The deal represents 9% of the Angelini family-controlled pulp and wood division of Empresas Copec.
[Fun fact: Anacleto Angelini Fabbri(January 17, 1914 – August 28, 2007) was an Italian-born Chilean businessman At the time of his death, he was South America's wealthiest person, with an estimated net worth of US$6 billion. He was chairman at AntarChile, one of Latin America's largest conglomerates.]
Next, the case for timberland as an asset class. Sam Radcliffe, Vice Presdident at Prentiss and Carlisle wrote an excellent paper of re-examining the case for timberland which you can download here.
There are plenty of other excellent papers on timberland like here and here.
Timberland is a real asset that offers diversification and attractive risk-adjusted returns in a portfolio that aren't correlated to stocks, bonds or even other real assets like infrastructure and real estate (more similar to farmland but it has different characteristics).
Right now, both stocks and bonds are way overvalued, so it makes sense for large institutions to diversify their holdings of real assets.
Anyway, the Prentiss and Carlisle paper which I referred to earlier is dated (2017). Recent trends in inflation and soaring demand for lumber, fueled by the demand for single family homes, have undoubtedly changed the demand for high quality timberland.
And this is how I view this Chilean timberland asset from Arauco, as another high-quality timberland asset.
Interestingly, back in 2018, the Hancock Timber Resource Group, one of the institutional leaders in timberland investing, acquired approximately 12,250 Hectares of timberlands in Chile:
The Hancock Timber Resource Group (HTRG) has completed the acquisition of approximately 12,250 hectares of timberlands in central Chile.
“The majority of these lands were established several decades ago as timber plantations and contain an extensive infrastructure network and thriving plantations. These are high quality assets that have been managed to supply hardwood fiber to Chile’s growing export chip market,” said Hancock Timber Resource Group President Brent Keefer, “We are very pleased to add these productive timberlands to our clients’ portfolios.”
The timberlands were acquired from Forestal Tierra Chilena Ltda. a limited liability company established by Mitsubishi Corporation and Mitsubishi Paper Mills Limited in 1990 to develop timberlands in Chile and provide fiber to Mitsubishi Paper Mills Limited.
The lands are located in the Bio Bio and Araucania Regions of Chile which are known for their productive soils and deep timber markets.
This is the company’s second acquisition in Chile. In 2014, HTRG acquired approximately 62,000 hectares of timberland through a joint venture with MASISA S.A., a Chilean forest products company. With this latest acquisition, HTRG manages approximately 75,000 hectares of timberland in Chile and 2.4 million hectares globally.
About the Hancock Timber Resource GroupThe Hancock Timber Resource Group, founded in 1985, is a division of Hancock Natural Resource Group, Inc., a unit of Manulife Asset Management Private Markets. Based in Boston, it manages approximately 5.9 million acres of timberland in the United States, Brazil, Chile, Canada, New Zealand and Australia on behalf of investors worldwide. Additional information about Hancock Timber may be found at www.hancocktimber.com.
When it comes to timberlands, just follow the Hancock Timber Resource Group, they know what they're doing.
The BTG Pactual Timberland Investment Group (TIG), isn't too shabby itself. It is one of the world’s oldest and largest timberland managers,and it recently joined nearly 200 forward-thinking companies as the newest member of the World Business Council for Sustainable Development (WBCSD):
With more than a 40-year track record, TIG has nearly US$ 4 billion assets and commitments and approximately 2.6 million acres under management throughout the U.S., Latin America and elsewhere. The TIG team is composed of more than 100 professional staff in 15 offices and home offices throughout the U.S. and Latin America, bringing local, regional, and global experience to bear on the management of client investments.
In 2020, TIG launched Landscape Capital, a new division that is seeking to accelerate the transition to a regenerative economy through natural climate solutions at scale.
“At TIG, we have long believed that investing in a sustainable manner can achieve compelling investment returns, while also creating benefits for people and the environment,” said Gerrity Lansing, Head of TIG. “Last year, we launched Landscape Capital, which is focused on delivering outsized climate benefits from natural climate solutions: when forests are planted, harvested and replanted sustainably, and the harvested wood is used in the right applications, the climate benefit of storing carbon in long-lived wood products and of displacing more carbon-intensive materials like concrete, steel or plastic can be 2-3x the benefit of the forest itself,” he added.
“We’re looking forward to working with the other members of WBCSD’s Forest Solutions Group, as well as with the broader network, to strengthen the role sustainably managed forests and forest products can play in mitigating climate change, as well as supporting sustainable development and biodiversity,” he added.
“We are delighted to welcome Timberland Investment Group to the WBCSD network and to the Forest Solutions Group. Their wealth of knowledge and expertise in sustainable timberland investment combined with their drive for responsible investment practices, and their commitment to sustainably managing the world’s timberlands while applying high standards of environmental and social governance innovation will bring added value to our network of member companies. It is a priority that we work together with companies like TIG that can help transform our world towards one that is net zero-emissions, circular, healthy, inclusive and resilient” said WBCSD President and CEO Peter Bakker. “WBCSD is dedicated to working towards a transformation in sustainable systems. This will only be achieved in collaboration with global industry leaders such as TIG and we look forward to working with them and benefit from their leadership and experience across our programs and projects.”
All this to say, APG and BCI picked a great partner in the BTG Pactual Timberland Investment Group (TIG), to invest in timberlands in Chile in a sustainable manner.
Lincoln Webb, Executive Vice President and Global Head, Infrastructure & Renewable Resources at BCI explains it in the press release: “As an active investor, we are excited by the opportunity to expand our global infrastructure and renewable resources program in Latin America with trusted partners. The investment provides compelling risk-adjusted returns for our pension plan and insurance fund clients, and increases our exposure to high-quality, sustainably managed forests.”
Below, watch a clip from BTG Pactual's Timberland Investment Group. Great clip, watch it and you'll understand why APG and BCI partnered with them to acquire timberlands from Arauco. It also shows you how critical forestry management is to addressing climate change, something both APG and BCI are keen on.