- When Oatly goes public, it will likely signal success for Blackstone’s nascent growth equity group.
- The Swedish oat milk producer has grown in tandem with the private equity firm’s growth equity arm.
- The partnership has caused some controversy but also showcases Blackstone’s hands-on approach.
- See more stories on Insider’s business page.
Plant-based milk producer Oatly is going public this week in an initial public offering expected to value the company at over $10 billion, according to an amended S-1 filing last week. The offering signifies a watershed moment for private equity firm Blackstone and its nascent growth equity arm, which first invested $200 million in the Swedish company last summer.
Oatly would rake in net proceeds of $976 million if the IPO prices at $16, the midpoint of its pricing range, it said in its updated S-1. Oatly plans to use the proceeds to fully repay a “sustainability-linked loan” it borrowed from a group of European banks in 2020, pay down outstanding bridge loans, and fund working capital and business expansion, according to the S-1.
The stock will trade on the Nasdaq under the ticker “OTLY.” Morgan Stanley, JPMorgan Chase, and Credit Suisse are underwriting the offering.
Blackstone’s July 2020 investment in Oatly attracted widespread attention for its participation from prominent celebrities, including Oprah, Natalie Portman, and former Starbucks CEO Howard Schultz, and its $2 billion valuation for the company. Blackstone now owns 7.6% of the company.
The capital helped Oatly fund two manufacturing facilities — one in Ogden, Utah, and another in Singapore. It also lent the legitimacy of a big US investor’s name to the Swedish firm, signaling the company was ready for global expansion.
Oatly owes its popularity, evidenced by how it doubled sales from 2019 to 2020, in part to its climate-conscious, young customers. The company says in the filing that “Generation Z and Millennials will become the dominant global generations in the coming years, bringing to the market a new set of values and expectations.”
Some of these very customers expressed outrage against Oatly after last summer’s deal, saying companies linked to Blackstone were contributing to deforestation in the Amazon rainforest, a claim Blackstone later denied in a statement.
Oatly defended its decision to work with Blackstone in a public statement in which it called Blackstone “the biggest supermarket of the private equity sector.” By partnering with Blackstone, Oatly said in the statement, it wanted to send a message to the global markets that sustainability-focused companies can produce substantial profits.
Blackstone Growth and Oatly have grown together
Blackstone Growth (BXG), which led the Oatly investment, was established in 2019 by Jon Korngold, a former General Atlantic executive. Its goal is to fund and support the maturation of fast-growing private companies, a departure from its better-known strategy of buying out stable, cash-flow generating businesses. BXG’s most notable investment thus far has been in dating app Bumble, which debuted at a staggering valuation in the public markets in February.
Its strategy has paid off handsomely. The division closed its first fund in March at $4.5 billion, making it the biggest first-time growth equity vehicle in history, and fueled Blackstone’s record profits in the first quarter of 2021, according to Pitchbook.
Oatly’s ascent began before the pandemic, as a growing number of consumers shunned dairy and turned to plant-based alternatives. Once the lockdowns began in the US, oat milk sales spiked 347.3% the first week of March, according to Nielsen.
Oatly, founded by Swedish brothers Rickard and Bjorn Oste in 1994, first entered the US market in 2017, a year after Verlinvest and Chinese state-owned conglomerate China Resources bought a majority stake in the company. Oatly uses technology based on research from Sweden’s Lund University to turn oats into a milk alternative, per its website.
Blackstone has taken a hands-on approach to partner with Oatly since it first started evaluating the company. After the summer 2020 deal was done, Blackstone’s second-in-command Jon Gray aimed to make the company both a client and a beneficiary of Blackstone’s portfolio, creating a virtuous circle of mutual growth, Korngold told Insider in a prior interview.
Blackstone, which is one of the world’s largest real estate investors, even began serving Oatly product in all of its full-service hotels.
For his part, Korngold invited Oatly’s leaders to meet with executives involved in Blackstone’s expansive warehouse-property business, which caters to the storage and distribution of consumer goods. He also suggested the brand confer with Blackstone’s lending arm to discuss credit lines that could facilitate its operations and growth.
Despite Oatly’s recent surge in sales, the company made a loss of $32.4 million in the first quarter this year, which it says in its prospectus reflects its investments in production, expansion, marketing, and new products.
The company is operating in a highly competitive space, acknowledging in its S-1 that “multinational corporations with substantially greater resources and operations” than Oatly may threaten its market share. Still, some industry analysts say Oatly has a leg up because of its nimbleness and the perceived sincerity of its environmental commitment versus larger conglomerates, the New York Times reported.
“There are very few brands out there that have this level of scale globally and yet are still early in their consumer-brand life cycle,” said Blackstone’s Ann Chung, who led the investment, in a July 2020 interview with the Wall Street Journal.
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