Russia’s third-biggest poultry producer, agricultural holding Prioskolie plans to sell a part of it’s assets, Russian newspaper Kommersant reported. Cherkizovo and CP Foods show interest.
Several Russian and foreign companies expressed their interest in the takeover, including the country’s biggest meat producers Cherkizovo, Miratorg, and CP Foods. Although no details are available so far, the cost of the deal is expected to be Rub23 billion ($ 390 million), which means it could become the biggest M&A transaction in the Russian meat industry since 2015, when CP Foods acquired 2 major poultry farms in the country.
In 2019, Prioskolie was ranked third in the list of biggest Russian poultry producers. The company then produced 452,000 tonnes of poultry meat, 7.3% of the Russian poultry production. Prioskolie posted net revenue of Rub38.7 billion ($ 620 million), 10.4% higher than during the previous year, and a net profit of Rub4.4 billion ($ 80 million), which was 69% bigger than in 2018. Prioskolie has not yet revealed the rationale behind the sell-off. The company’s financial advisor, Unicorn Capital Advisers, said that Prioskolie might re-invest the funds raised with this deal.
Russia’s biggest turkey meat producer Damate showed interest in buying the bankrupted duck meat company Donstar.
The Cherkizovo’s press office confirmed that the company was ready to consider the acquisition of new assets. However, the company is only interested in buying 100% of assets, not in any kind of joint venture. CP Foods said that the company is basically interested in all assets in the Russian poultry and pork industry, including in the Prioskolie’s business.
There is a good chance that Russia’s plan to boost its agricultural export to $ 45 billion by 2024 will fall short, because of the continuing Covid-19 pandemic.
Covid-19 is not an obstacle
It is not likely that the Covid-19 pandemic would have a negative impact on the prospects of the deal, commented Artem Motorniy, managing partner of the Moscow-based think tank Walnut Capital. Currently, major investors have a growing interest in food production, because this industry is likely to be ahead of the curve recovering from the pandemic aftermath, he added. The oversupply on the Russian poultry market could be the reason why Prioskolie wants to get rid of some assets, commented Marat Ibragimov, senior analyst of the Russian bank Gazprombank. Profitability in the Russian poultry industry is under pressure, so some companies are looking for a way out, he said. According to Ibragimov, the deal could be completed in several stages. The potential investor would begin with buying a minor share in the offered assets to assess its production and logistics potential accurately.