Russian integrated meat, feed company purchases grain producer

by Susan Reidy
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MOSCOW, RUSSIA – Cherkizovo Group, a Russian vertically integrated meat and feed producer, announced on April 28 that it has completed the acquisition of NAPKO, one of Russia’s leading grain producers.

The transaction includes the acquisition of NAPKO’s agricultural land bank of 147,000 hectares, located in the Lipetsk, Tambov and Penza regions of Russia, as well as the supporting production infrastructure to cultivate the land and store grain. In 2016, NAPKO produced 250,000 tonnes of grain. The transaction increases Cherkizovo Group’s total operating land bank to 287,000 hectares.

“The acquisition of NAPKO marks an important step in the development of our grain farming segment, and we are pleased to have completed the transaction in a timely manner,” said Sergey Mikhailov, chief executive officer of Cherkizovo Group. “NAPKO’s assets are an excellent strategic fit for Cherkizovo Group and will allow us to boost self-sufficiency in grain to 60% over the next few years from 30% at the end of last year. We have a number of synergies with NAPKO, which will help us improve efficiency and reduce our production costs in the grain farming segment. We do not see any potential risks in integrating the acquired assets as they only complement Cherkizovo’s business model.”

Total cost of transaction was 4.872 billion rubles ($85.6 million). An independent valuation of the transaction, conducted by Ernst & Young, confirms that NAPKO fully corresponds with the average market multiples of similar Russian companies.

Independent members of Cherkizovo board have approved the proposed acquisition by Cherkizovo Group’s company of 100% participation share in the charter capital of NAPKO from affiliated persons. As part of the transaction, Cherkizovo assumed NAPKO’s debt, which stood at 751 million rubles as of March 31, 2017. This acquisition will not violate any of Cherkizovo Group’s bank covenants.

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