Interview with Dawn Sanderson, Group General Counsel at Al Dahra

How would you summarise Al Dahra’s operations? 

The Al Dahra Group is a vertically integrated agricultural business: we own land, grow product, process, and provide logistics to the end customer. The primary product is alfalfa or animal feed - forage products. Our key customers are dairy and livestock farmers. We have farms from California to Perth, Australia – a truly global business. It started from the UAE’s requirement for food security. Because of the scale of business, we operate about 50:50 government to commercial, and ‘go to market’, where our main customer base is in the Middle East and Asia.

In terms of CEE activities, what is your experience of operating in Romania?

We operate a significant contiguous business on Braila Island: Agricost, the largest contiguous farm in the EU at 56,000 hectares. There is also a trading entity, Al Dahra Agriculture Romania, and a third business, SEEFCO, South East Europe Fertiliser Company: a 50:50 JV with OCP SA, a previously state-owned fertiliser enterprise in Morocco, and the world’s largest exporter of phosphates. We teamed up with OCP SA because we consume a lot of fertilisers, particularly in Agricost, and because of our CEE connections.

Romania remains an extremely significant jurisdiction for Al Dahra. Agricost, our largest asset, is a model farm because of the technology and innovation employed there. We use the know-how and expertise and try to export that to other farms in the Al Dahra network. We are constantly looking at new opportunities in Romania. Being part of the EU makes it quite attractive in terms of governance and compliance: having laws and regulations you can expect to be applied makes it more attractive to foreign investors.

How has investment in Romania evolved?

When I joined Al Dahra in 2016, we were looking at a number of targets in Romania, several of which did not work out on initial due diligence. But Agricost was very robust, and we were able to overcome early due diligence hurdles. His Excellency Khedaim Abdulla Al Derei, one of the founders of Al Dahra, was instrumental in investing in Romania and remains on the board of Al Dahra group. He
is very forward-thinking. We concluded the Agricost transaction in 2018. The trading entity really got going in 2019, once the Agricost transaction had happened and we signed SEEFCO in 2019. We have not yet crystallised the next target, but there are still remaining targets under review. Another one will happen for sure.

What ESG due diligence criteria do you apply? 

ESG has become more important for everyone, particularly from a financing perspective. Al Dahra used to be 100% privately owned, and is now part owned by ADQ, the newest sovereign wealth fund in Abu Dhabi. Following the transaction we now have a global director of Sustainability. We have a lot of ESG initiatives - Romania, in particular, has many initiatives at the Agricost farm. 

Any potential targets will have a comprehensive ESG review prior to acquisition. But Al Dahra has always looked for opportunities, as opposed to perfection. In doing the due diligence, we put in place the right framework post-acquisition, if it is not already in place on closing.

ESG: can you future-proof before making an acquisition, or do you adjust to regulations once you’re in the driving seat?

Probably the latter. We want to identify the scale of the task at the outset, because it also goes to price. If we know we will have to spend a lot of money fixing particular issues, or things are not up to a certain standard, then you would be looking for a price chip. You also need warranties and indemnities built into the transaction if you know there is a potential regulatory risk. But if it is the right target, it would not prevent us from going ahead. We will fix it afterwards.

Are there particular opportunities when doing a deal in CEE?

We are already active in Romania and Serbia and have a large commercial arrangement with a supplier in Estonia, also linked to Latvia, Lithuania and Finland. These jurisdictions offer lots of opportunities, particularly in agriculture. The quality of land in Romania, for example, is one of the best in Europe, and therefore we can achieve very good yields. In addition, the cost of the
land is still affordable in CEE, and since the Romanian agricultural sector is currently still developing, there is considerable room for growth and optimization. The EU aspect, nevertheless, has pros and cons.

The pros: you have got a clear regulatory framework. In a non-EU country, however, there might be less regulation, which can make it easier to enter that market. Doing business in Estonia, the legal framework seems very sensible: so far it has been quick and easy to do business there, everyone speaks English, and the documents are in English. From a commercial perspective, the business is very excited about such jurisdictions because there is so much opportunity and there are not many other players in our market in those jurisdictions yet. We continue to look at Romania and Serbia for further potential growth because of the opportunities they offer in terms of a highly skilled workforce at competitive prices and cost-competitive and fertile land.

The cons: Some countries are rather bureaucratic in terms of systems and processes - ease of doing business. What the UAE has achieved in a very short space of time - smart services, ease of doing business, everything online, eliminating bureaucracy - could really benefit them, particularly to encourage more external investment.

When Al Dahra acquired PKB Korporacija through a Serbian privatisation tender, what were the main challenges?

It was done working very closely with the Republic of Serbia, due to the transaction being governed by the privitisation law. Despite a rather lengthy process, the transaction progressed smoothly. The UAE has done a lot of investment in Serbia so we knew what to expect. 

That business needs a lot of investment due to the age of the asset and lack of recent investment in it. We have made large investments into equipment, people, buildings, factories; a massive investment which benefits the wider Serbian community. Like most of external investments, this one represents significant benefits for the local community.

How much of an issue is transaction financing?

We take a longer-term view, but our financing is often done at the UAE level - because of who we are and where we are, and the fact that the UAE is where our HQ and holding level are. We find the banks are very supportive of Al Dahra. So, financing has not particularly been an issue, also because we have a very effective Treasury Director.

Looking across the CEE region, what jurisdictions stand out for future investment potential?

Ukraine was looking very attractive prior to the war. It remains to be seen what happens when that situation improves. Bulgaria has always been an interesting jurisdiction: we have looked at a number of opportunities there, but unfortunately, none have come to fruition yet. The arrangement in Estonia and other Nordic states may develop over time, which may lead to us to having a presence in those jurisdictions, which presents opportunities. We will definitely continue to look at targets in Romania and Serbia. In terms of Al Dahra overall, we always look for places where there’s opportunity - CEE remains a key focus.

Does the pipeline of EU regulations affect your strategy?

To the extent they may ultimately affect the cost, they can be discouraging. The same applies for any business: if the outcome of increased regulation is that it reduces margins and just makes it a lot less profitable than before this may sway your decision whether to invest there or not. So, the EU need to make sure that in improving the situation in certain respects, they do not then discourage investment - not just internal investment, but foreign direct investment as well. Even in agriculture, a lot of the investment in a country is external.