New York City, U.S.A.-based Peritus Capital was recently launched with the goal of providing financing to aquaculture operations with a sustainability focus. In an interview with SeafoodSource, CEO Howard Tang outlined the firm’s investment strategy.
SeafoodSource: What is your investing philosophy, if you have one?
Tang: We’re definitely focused on the value chain of the companies we work with, and how incorporating sustainability into their businesses is ultimately a fundamental aspect of what is going to make these businesses successful. From my perspective, if they’re not thinking about these things, they may not get the maximum price for their products; They may get outcompeted by others. And if you’re unsustainably producing your product, by definition, you’re going to run out of natural resources. As a result, you’re going to harm your business. One way or another, we’re going to be focused on ESG for the clients we involve ourselves with. It’s essentially that every business should be sustainable, is the way I see it from personal perspective.
And when we invest, we’re going to be long-term partners. For us, private equity firms with three- to five-year exit horizons don’t make sense. And you see a longer-term vision with most successful firms, for example, AquaSpark which has a very long holding period. For us, we want to be a permanent part of the businesses we invest in, because we think that’s the only way to develop the maximum capacity and true potential of the company.
Additionally, we’re very selective in terms of deploying the partners’ capital into projects. We will get involved over time, but I would say the majority of funding is going to come from our institutional investors … I just don’t have USD 100 million (EUR 84.1 million) in my pocket. Maybe at some point that will happen, but that’s not our situation at this particular point.
And we’re going to be selective in our investments. Unfortunately, you can’t always put your capital into all the ideas you want to be involved with. Sometimes, other types of capital are better-suited to one project or another. Also, while I started out debt-financing small businesses, we will probably not provide debt facilities from our own money, mainly because we wouldn’t be able to deploy enough capital to have a diversified enough portfolio for to manage that debt.
SeafoodSource: Do you have a limit or a minimum on the size of the projects you’re aiming to get involved with?
Tang: We want to look at opportunities where the capital deployed will be at least USD 10 million (EUR 8.4 million). With that being said, we will let the opportunities speak for themselves. The wastewater technology firm didn’t require that much to start, and it already had successful facilities in operation in China – three co-located facilities producing thousands of tons of single-cell protein that was then sold to the local aquafeed market. And they have potential for 12 more sites in China. So we didn’t have to put in a ton of capital to launch the pilot, because much of the technology has already been in place for many years. We’re just bringing it into international arena.
SeafoodSource: What other projects are you investing in right now?
Tang: We’re working on a few interesting M&A opportunities, where putting together some private equity firms with fairly large aquaculture concerns. That’s something we’re eyeing just because we have relationships in the states. And we have some more interesting stuff coming soon. There are some very interesting opportunities in Turkey. We’re working on supporting a recapitalization of a very large sea bass and sea bream producer, along with a few minority investors and an equity partner there. That will be a recapitalization of their balance sheet – that will mean around USD 50 million (EUR 42 million) in terms of capital being put into that business.
