Algae - it has real appeal, ﬁnancially
An Israeli kibbutz located north of Eilat is not alone in seeing the potential of one of its products. Its Algatechnologies business, which commercially cultivates microalgae to supply one of the world’s most powerful antioxidants available for human consumption (astaxanthin), has been bought by a leading UK investment firm.
Founded by former Investec colleagues Leon Blitz and Bradley Fried, Grovepoint has invested an estimated $50 million in Algatech, based in the Arava desert, for a 56 per cent stake in the business.
Algatechnologies was founded by Kibbutz Ketura in 1998, supported financially by JCA (a British charity that supports novel Israeli projects in education, tourism and agriculture). The JCA was the controlling stakeholder. It now holds a 23 per cent share while the kibbutz holds 21 per cent.
Algatech has developed a technology that enables it to grow microalgae on a large scale. These microalgae are then used to harvest the commercially successful astaxanthin, also known as “asta”. Astaxanthin is the dark red organic pigment found in algae and aquatic animals, which gives shellfish, salmon and flamingos their distinctive pink/red colouring. It has several benefits such as anti-inflammatory and to promote skin, joint, eye and muscle health. It can be found in sun creams, food supplements, cosmetics and crustacean food colourants.
The deal is Grovepoint’s first investment in Israel. Mr Blitz, who left Investec in 2009 to launch Grovepoint with Mr Fried, said: “We always wanted to do something inward-investing into Israel. We are very keen on the country because of their technological prowess particularly in water, agriculture and food, biotech and clean tech. We felt that this was very transportable and respected internationally.”
Grovepoint set up an Israeli office last year, run by Hagai Stadler and Gil Meirovich.
Mr Blitz said: “The JCA had been supporting the kibbutz for 14 years but it got too big for the charity. They didn’t have the resources to increase production.” Experienced investor Stephen Grabiner, the former media chief of Apax Partners, has partnered Grovepoint and also an investor in Alagatech.
“Microalgae is a very hot area globally,” says Mr Blitz. “The whole antioxidant, well-being, health and nutritional space is such a growth area. It’s a really sexy space.”
Algatechnologies does not sell “asta” directly to consumers, but supplies the raw materials to manufacturers which use it in their products. Its main markets are Israel, the US and Japan. Customers include NBTY, the parent company of Holland & Barrett.
Grovepoint plan to double Algatech’s production over the next few years and will be making additional capital available for growing the business, marketing the “AstaPure” brand globally and investing in R&D, so new algae-derived products can be brought to market.
South Africans Mr Blitz and Mr Fried set up Grovepoint three years ago. The close friends, who have know each other for 40 years, both grew up in Cape Town and trained as accountants at Arthur Andersen.
Mr Blitz joined Investec in South Africa over 20 years ago, before moving to London with the firm when it opened its first bank there in the early 1990s. He became head of direct investments and growth and acquisition finance, and head of private banking.
Mr Fried is the former chief executive of Investec Bank in the UK in 2000. After training at Arthur Andersen, he went to the US to complete an MBA at the Wharton School of the University of Pennsylvania. He joined McKinsey & Co in New York where he was partner before moving to Investec Bank in the UK becoming its London chief executive in 2000.
Since Grovepoint was founded, it has made $1 billion of investments. The founders are keen to explore investment opportunities in Israel. “We think Israel is very exciting,” says Mr Blitz. “One area that people seem to accept Israel for is its technological prowess and know-how.”