SPACInsider contributor Eric Weidemann this week compiled his three favorite potential SPAC targets among vertical farming ventures. We look at why they are compelling and why each could be a fit for a blank-check merger.

Agriculture has been a major target for disruption as technological adoption has lagged in the sector despite rising food demand and it is also low-key major contributor to pollution. The EPA estimates agriculture is responsible for 10% of the US’ greenhouse gas emissions, and that only counts the cultivation itself.

The massive logistics chain needed to transport and distribute agricultural products from farms to processors and urban markets is also a portion of transportation’s 29% share of emissions. And so, disrupting agriculture has many two-birds-with-one-stone benefits.

The market has also appreciated SPAC deals that have targeted this domain. Indoor farming technology company AppHarvest (NASDAQ:APPH) is currently trading down from its peak of $38.21 after completing its combination with Novus Capital in January. But, closing Thursday at $17.57, it is clearly still marked as a successful transaction.

Spring Valley (NASDAQ:SV) added another agtech deal to the 2021 roster in March, announcing a $856 million combination with vertical farming venture AeroFarms. The advantage of both of these targets is that they have leveraged technology to make highly dense and efficient farms that use little to no topsoil and far less water – both resources expected to be in shorter and shorter supply.

On a planet where a variety of factors is causing further loss of available arable land, both AppHarvest and AeroFarms represent attempts to do more with less. But, they actually represent two opposing schools of thought between greenhousing in the case of AppHarvest, to vertical farming in the case of AeroFarms.

Greenhouses use natural light and therefore are generally more energy efficient than vertical farms, which rely on constant LED lighting facing each section of plants. However, vertical farms provide much denser production per square inch and, after winter heating costs are factored in, can approach greenhouse-level energy efficiency. This is particularly true with ever-improving LED technology.

But the big advantage vertical farms hold over greenhouses – even very technologically advanced ones – is their ability to be built anywhere, including in urban environments. This means their go-to-market is not only cheaper, but more efficient as they can set up shop in a warehouse within a mile of dozens of urban grocers.

Bowery Farming

Like AeroFarms, Bowery Farming was founded in New Jersey, and has been growing like Jack’s magic beanstalk.

In March, Bowery announced that it had expanded its produce distribution to 800 stores in six mid-Atlantic states and had seen nearly 700% sales growth since January 2020. It considers itself the largest vertical farming company in the US and its sales of leafy greens and herbs have also quadrupled on e-commerce platforms like Amazon.

Bowery farms are more than 100 times more productive than a comparable square foot of traditional farmland and this efficiency is beefed up by the company’s internally developed operating system. BoweryOS uses sensors, machine learning and automation to monitor and constantly intervene to provide ideal conditions for each plant.

Although the company has not raised outside capital since 2019, it has brought in $172.5 million to date. And, buoyed by its recent growth, the company announced in September it had assembled the sort of infusion of executive talent from listed majors that indicates it sees public listing in its future.

Among those hired was former chief supply chain officer for Walgreens Boots (NASDAQ:WBA) Colin Nelson who will serve in the same role for Bowery. The company also hired Chief Revenue Officer Carmela Cugini, who had previously served as general manager of Walmart (NYSE:WMT)’s US e-commerce team and Chief Commercial Officer Katie Seawell who formerly served as SVP of product and marketing at Starbucks (NASDAQ:SBUX).

Plenty

While Bowery puts vertically-farmed greens on Albertsons (NYSE:ACI) shelves on the East Coast, San Francisco-based Plenty is providing the same to 430 Albertsons locations in California.

Plenty is going big in the nation’s biggest state. It is currently building a 95,000-square-foot warehouse farm in Compton, California that will host 365 harvests per year. The pandemic pushed back its plans, but this massive facility is expected to deliver its first crops in early 2022.

Its designs differ somewhat from Bowery, as its vertical set-ups are, well, more vertical. Leafy greens and berry plants on Plenty farms grow horizontally out from the sides of tall plank-like surfaces that run straight up and down. It claims this design uses 99% less land and 95% less water than traditional crops.

Although it was founded just one year before Bowery, it has raised significantly more outside capital, taking in $541 million through six funding rounds. Its $140 million Series D in October was led by Softbank, which has had a number of portfolio companies hit the public markets through SPACs. Driscoll’s, which produces about a third of the US’s berries, also participated in the round as strategic investor.

No SPAC currently searching has singled out agriculture as its primary area of focus, but Novus listed with a focus on high tech targets with innovations in 5G, AI, cloud computing or machine learning before announcing with AppHarvest.

Vertical farming companies like Plenty do rely on AI and other tools for their farms to operate, so the sphere is likely to not only attract attention from SPACs with obvious green thumbs. That said, two SPACs have filed to IPO with an explicit focus on agriculture and agtech – Gladstone Acquisition Corp. and Alexandria Agtech/Climate Innovation Acquisition Crop. These two aim to raise $100 million and $250 million, respectively at their forthcoming IPOs.

Kalera

Kalera (OL:KAL) is an Oslo-listed vertical-farming venture that has been on the market for funds to fuel its US expansion.

In October, it launched a $100 million private placement to fund an aggressive rollout and has already been putting pins in the map. Kalera operates two vertical farms in Orlando, Florida and one in Atlanta with new farms under construction in Houston, Denver, Seattle, Hawaii, Minnesota, and Columbus, Ohio.

With this expanding footprint, Kalera is one of the fastest growing vertical farmers in the world. These new farm projects will give it a projected yield of tens of millions of heads of lettuce per year or the equivalent of over 1,000 acres of traditional farmland.

For decades, investment and research has poured into genetically modifying crops to become more resilient against pests, disease and weather conditions. In vertical farming environments, all of these factors are eliminated or controlled.

As such, Kalera in February acquired seed breeder Vindara to internally move in a direction towards creating plants that don’t need pest-control tradeoffs, but are simply productive and flavorful in controlled environments.

SPACs sometimes shy away from targets that are already listed as such deals present lower potential upside if the target was already rationally priced by the market. But, an uplist from Oslo to a US exchange would open up significantly larger public funding opportunities that could bring value in of itself. Based on Kalera’s Oslo pricing, it has a market cap of about $672 million.