Agricultural giant Alico Inc. is buying three Central Florida citrus operations for $363 million in an aggressive move that the Fort Myers company says will make it the largest citrus producer in the United States.
The deals announced Wednesday more than triple Alico's agricultural footprint to more than 30,000 acres and triple its return to shareholders. The deals show Alico is gambling that Florida's orange groves will bounce back from the citrus greening bacteria that has devastated the industry — to the point of pledging to replant trees that have been lost to the disease.
"It shows a commitment that's sorely needed right now," said Ansley Watson Jr., executive director of the Florida Citrus Processors Association. Right now, he said, "the processors have been getting to the point where there is almost not enough fruit to run their plants."
Alico CEO Clay Wilson said his company has no other intention for its new acquisitions than to keep producing citrus over the long haul.
"Alico is a farming company foremost," he said in an interview with the Tampa Bay Times.
He acknowledged that "anybody in Florida who owns land is in the real estate business," but said he doesn't see any demand to develop the land his company is buying, explaining, "Where we're located is so far from the coast, I don't see doing anything like that in my future."
As for planting new trees, he said, "for a long time, growers were not very optimistic about the future of their groves and didn't plant trees. My dad always told me, 'Your future as a farmer is in young trees.' So we never stopped."
In the biggest of the deals disclosed Wednesday, Alico is paying $274 million for Orange-Co. LP, which has about 20,263 acres, one of the largest contiguous citrus grove properties in the state. The deal was financed in part through proceeds from Alico's recently announced $97 million sale of its sugarcane assets.
Separately, Alico is also buying Silver Nip Citrus for $72 million, adding 7,434 acres into its fold, and in September it closed on the acquisition of Gator Grove for $16.6 million, adding about 1,241 acres contiguous to the Orange-Co property.
Together, the deals will boost Alico's annual production to about 10 million boxes, or roughly 10 percent of Florida's citrus production. Last season, Alico produced 3.4 million boxes. That 10 million boxes puts it ahead of all other American citrus producers, the company said.
However, Consolidated Citrus, which is mostly owned by King Ranch of Texas, controls 40,000 acres of planted trees, which is more than the 32,000 that Alico will now own.
Martin Genauer, partner at Berger Singerman in Miami, which represents Orange-Co., said his private client, whom he declined to name, has owned its acreage for about 10 years. Neither a concern of the future of the industry nor the threat of citrus greening was the impetus to sell, he said.
"I don't think there was any particular factor. … I think the offer was attractive," Genauer said. "There were probably some other uses they have for the money."
Wilson said he has had discussions about buying some of the properties for a couple years, and the deals jelled simultaneously this year.
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He described the acquisition as "transformative" for his 54-year-old company, an endorsement apparently echoed by Wall Street. Shares in Alico surged 18 percent in early trading Wednesday before closing at $40.90, up $5.06 or 14.13 percent.
The Alico deal is "clear evidence of the consolidation that has been going on the last decade or so, but it's also a show of optimism," said Andrew Meadows of Florida Citrus Mutual, a growers advocacy group. "Despite all the premature reports of our demise, we're still bullish. Growers are still bullish on the future of the industry, and I think this deal is representative of that."
Doug Ackerman of the state Department of Citrus agreed: "This is a clear statement that Florida citrus remains an attractive sector for growth. They're betting on Florida citrus, and so are we."
The future of orange juice
Oranges are so intertwined with Florida's identity that the fruit is emblazoned on state license plates. In 1967, the Legislature named orange juice the official state beverage. The orange blossom is the official state flower. The orange is the official state fruit. There is a Citrus County and an Orange County. The football stadium at the University of Florida is even named for Alico's former CEO, citrus baron Ben Hill Griffin Jr., who died in 1990.
Florida produces more than 70 percent of the U.S. supply of citrus and is second only to Brazil in global production. But the industry has been in serious decline for decades.
Hurricanes, canker and, most recently, citrus greening have taken a deep toll, prompting more and more growers to sell their groves to developers. Meanwhile, orange juice has fallen out of favor as a breakfast drink, with total U.S. retail sales dropping to the lowest level in at least 15 years during the 2012-13 season.
As a result, Florida land devoted to citrus — which includes grapefruits and tangerines as well as oranges — plummeted from about 815,000 acres in 1996 to about 515,000 acres at last count.
Greening, also known as huanglongbing, HLB, or "yellow dragon" disease, has proved to be the toughest foe to date. First discovered in China, the bacterial infection is spread by a gnat-sized insect called the Asian citrus psyllid. It shrivels up the trees' roots, so they don't absorb water as well, and the trees begin dying. Greening currently affects every orange-producing county in the state.
After years of frustration and despair over greening's effects on their groves, growers and researchers say they see hope. One option is growing genetically modified oranges, a solution that would require approval by regulators and acceptance by consumers. More immediate options include heating trees and using antimicrobial treatments.
Few groves in the state have been spared at least some greening. But Wilson said the groves Alico bought had to have a "relatively minor" presence of the disease to be considered.
In its latest forecast, the U.S. Department of Agriculture predicted Florida would produce about 108 million boxes of oranges in the 2014-2015 season, up 3 percent. The uptick is in line with Alico's projections.
"We have a better crop than we had last year, which is a huge (improvement) from where we were the past two years," Wilson said.
Alico is so confident in the future, he said, that it's hunting for even more land to buy.
Wilson said he isn't bothered that orange juice consumption has fallen to a record low. The industry blames supply and demand, saying some shoppers are no longer able to afford orange juice as a weekly shopping staple because low production has driven prices up too high.
"The simple fix is to produce more juice," Wilson said, "and that's what we're attempting to do."
Times researcher Caryn Baird contributed to this report. Contact Jeff Harrington at firstname.lastname@example.org or (813) 226-3434. Follow @JeffMHarrington.