Indoor farming start-up with Martha Stewart on its board joins the SPAC craze to go public

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An indoor farming start-up that heralds itself as the future of agriculture and has Martha Stewart on its board announced Tuesday it is going public through a reverse merger, the latest in a series of blank-check deals during the coronavirus pandemic.  

Kentucky-based AppHarvest is merging with special purpose acquisition company Novus Capital Corp., while picking up $475 million in financing, $375 million of which is coming through a PIPE, or private investment in public equity.

Shares of Novus Capital were rising more than 15% on Tuesday after the deal was publicized. The transaction is set to close in the late fourth quarter of this year or early in 2021, according to a release

AppHarvest operates a 60-acre facility in Morehead, Kentucky, that it says is one of the world’s largest high-tech greenhouses. Its first harvest of tomatoes is anticipated early next year. 

“We want the consumers of our fruits and vegetables to be the owner in our company, be the advocate in marketing with us that is going to help drive agriculture forward here in America,” AppHarvest CEO Jonathan Webb said Tuesday on CNBC’s “Squawk Box.”

The capital raised through the deal will be used to scale up AppHarvest’s indoor farming facilities, according to a release. Special purpose acquisition companies, or SPACs, raise money from investors through an IPO and then attempt to merge with a private company to take it public. It has been a record year for SPAC offerings during the Covid-19 pandemic. 

The transaction announced Tuesday gives AppHarvest, whose board also includes investor Jeffrey Ubben and Impossible Foods CFO David Lee, a valuation of around $1 billion. 

Webb defended the valuation, contending it reflects both the opportunity and the necessity for indoor farming in the world as it experiences the realities of climate change alongside a growing population

“The world needs 50% to 70% more food by 2050. Some are saying we would need two planet Earths to grow that food with the way we’re currently growing it today,” said Webb, a Kentucky native who founded AppHarvest in 2017. He previously worked on solar projects with the Department of Defense. 

“In my lifetime, the way most power will come from renewables, most cars will be run on electricity, most fruits and vegetables in this world at scale are going to be grown indoors and in a controlled environment,” he added. “We simply do not have a choice.” 

AppHarvest said its indoor farming approach uses 90% less water than traditional agriculture and suggests its location in eastern Kentucky can lower transportation costs and emissions when delivering the produce. A majority of fresh tomatoes sold in the U.S., for example, are imported from Mexico.

“We’ve pushed most of our produce production down to Mexico, trucking it 2,000 miles to get to major markets,” Webb said. “We’re going to rip the produce industry from the Southwest of the U.S. and Mexico. We’re going to bring it over here to central Appalachia.” 

Stewart, appearing on “Squawk Box” alongside Webb, said she was motivated to join AppHarvest’s board by its mission of environmental sustainability. Her appointment was announced in August.

“I think they are riding a wave into the future,” said Stewart, famous for creating a domestic empire and infamous for going to prison in an insider-trading scandal. “I am part of the secular shift to vegetable-based diets here in the United States, and AppHarvest fits the bill.” 

AppHarvest has previously received investment from AOL co-founder Steve Case’s venture firm Revolution, which operates the Rise of the Rest Seed Fund that backs start-ups located outside of Silicon Valley, New York City and Boston. 

Webb said AppHarvest’s mission also is to bring high-quality jobs to eastern Kentucky, a region that has fallen on hard economic times as the coal industry declined.

“We’ve got some of the hardest-working men and women in the country that built this facility” in Morehead. “It’s project one,” Webb said.

“We’re on a warpath here to change agriculture for the good, get chemical pesticides out, get labor practices we can all be proud of,” he said. 

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