Ukrainian agro holding Kernel is in negotiation to acquire farming enterprises managing in total 150,000 hectares of prime farm land under long-term leasehold agreements, located in central Ukraine.
According to a company report issued on Wednesday, the total expected consideration is $170 million (cash free/debt free).
Kernel said that the contemplated acquisition targets are on-going farming enterprises and are expected to deliver a full crop in 2011.
Total expected FY2012 (financial year) EBITDA contribution from acquisitions is in the range of $40 million, Kernel said.
The holding also said that despite delays in the negotiation process, Kernel management expects to acquire further deep-water grain terminal capacity in Ukraine for an estimated $120 million to $130 million consideration, providing the group an additional 2.5 million tonnes of grain throughput capacity on the Black Sea and $25 million EBITDA contribution per year.
Acquisition of the 300 000 tonnes per year additional crushing capacity in Ukraine is for a total consideration in $60 million range. Location of the target acquisition is viewed as strategic and would largely complete the company’s acquisition process in sunflower seed crushing capacity in Ukraine, reads the report.
The company also said that Kernel has studied acquisition of oilseed crusher operating in the Russian market. Several targets have been short listed by Kernel management, with a recent offer being turned down following a significantly higher bid by a Russian competitor company.
The company plans to finance the acquisitions from cash generated by its operating activities, debt and a capital increase in the range of $135 million.
The company said that in accordance with the company’s development strategy, Kernel announced the signing on 21 March 2011 of a call option agreement for the acquisition of a 71% controlling stake in Ukkros (subject to approval by Antimonopoly Committee of Ukraine) for a total $42 million cash consideration to be paid under the call option agreement. Ukrros enterprise value is estimated in the range of $160 million, including net debt in the range of $100 million and minority shareholders. The company expects EBITDA contribution from Ukrros in the first full fiscal year following acquisition (FY2012) to be in the range of $40 million.
According to the report, the Ukkros acquisition adds 93 000 hectares of prime farm land, 87,000 tonnes of grain storage capacity, and 22,000 tonnes per day of sugar beet processing capacity to the company. Following consolidation of Ukrros farm operations, the group expects a twofold increase in own farm production, reaching up to 600,000 tonnes in aggregate for the company per year.
Kernel Group is a vertically integrated national company that has been working in the Ukrainian agriculture industry since 1994. It is a large player on the sunflower oil market and ranks among Ukraine’s top-five grain exporters.
In the first half of the 2011 financial year (July 2010-December 2010) Kernel increased its net profit by 1.2 percent year-on-year, to $83.49 million. Its profits from operating activities rose by 49.4 percent, to $122.37 million, while its revenues soared by 77.9 percent, to $911.78 million.
