Major Thai Company Buys Russian Poultry Business

THAILAND - Major Thai feed producer, livestock business and food processor Charoen Pokphand Foods PCL. has invested in a top Russian poultry company.
calendar icon 28 July 2015
clock icon 4 minute read

The Board of Directors of Charoen Pokphand Foods PCL (“CPF”) has approved CPF Netherlands BV, a 99.99 per cent-owned subsidiary of CPF, to enter into an agreement to acquire an integrated poultry business from Agro Invest Brinky BV.

Mr Adirek Sripratak, President and CEO of CPF said that the Board of Directors foresees the acquisition as an opportunity for CPF to expand further into Russia which has significant growth potential for meat consumption.

The acquisition will be completed in 2 transactions. CPF will acquire an 80 per cent interest by the end of 2015 and the remaining 20 per cent interest will be acquired by the end of 2018.

For the first transaction, CPF Netherlands will acquire a Russian company (“Target company”) which will hold 80 per cent interest in CJSC Poultry Production Severnaya (“S”) and CJSC Poultry Parent Stock Production Woyskovitsy (“W”).

S&W operate an integrated poultry business in Russia and are engaged in the production of feed, breeding of parent stock, hatching, as well as operation of broiler houses and primary processing.

In 2014, S&W generated consolidated sales of RUB 16,935 million and net income of RUB 5,097 million, or the equivalent of THB 10,222 million and THB 3,076 million respectively. The ascribed Enterprise Value of S&W is USD 680 million, or the equivalent of THB 23,766 million.

Furthermore, S&W are considered as one of the top 5 poultry companies in Russia with a market share of about 5 per cent in the domestic poultry industry. The immediate benefit that CPF will gain from the transaction is to have a strong footprint across the St Petersburg and Moscow regions.

The excellent management, strong operational presence and consistent financial performance of S&W would offer an ideal platform for CPF to become one of the leading poultry players in Russia.

The investment is in line with CPF’s strategic objectives to focus on its core businesses and further diversify its geographical presence internationally.

Mr Adirek added that as a leading poultry producer in Asia, CPF hopes to leverage on their expertise to support the future success of S&W’s business in Russia.

The integrated production process at S&W also provides an ideal platform for further growth in a relatively fragmented poultry market with no dominant players and potential consumption growth given the large population size of over 140 million in Russia.

Together with its swine business in Russia, CPF will be able to create a multi-species protein business there and also create the opportunity for CPF to add value to its meat products and look into potential meat export opportunities from Russia to other countries.

Ms Willeke van den Brink, CEO of Severnaya and Woyskovitsy said: “After a highly successful two decades in the Russian poultry market and growing a small family enterprise to one of the leading players in the industry in Russia, we feel that the company can realise its full potential and enter its next growth stage by being part of a large multi-national player with a long term vision.

"We are convinced that CPF, with its global presence and strong focus on growth is the perfect partner for this endeavour and look forward to growing the business together with them.”

The completion of the transaction is subject to antitrust approval in Russia and other conditions precedent.

Rabobank acted as the financial advisor to CPF for the transaction.

(THB equivalents have been converted at RUB 1.6567/THB 1 and THB 34.95/USD 1 for illustrative purposes only. The actual historical exchange rates may be different).

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