Cherkizovo Group will pay for Igor Babaev's family

Cherkizovo Group will buy Napco grain company owned by its shareholder Igor Babaev for 5.75 billion rubles. In return, it will receive 147 thousand hectares of farmland.
During the transaction, one of the largest Russian agricultural holdings, Cherkizovo Group, will receive 147,000 hectares of agricultural land "in strategically important for the company of Lipetsk, Tambov and Penza regions," it follows from her report. Thus, the land bank Cherkizovo will increase to 287,000 hectares. In addition, the group will buy an accompanying production infrastructure for the cultivation and storage of wheat, corn, sunflower, peas.

The purchase will reduce the dependence on the volatility of the grain market and the ruble exchange rate, the group notes, calling "Napko" "an important and proven partner." Cherkizovo, according to its own data, buys from a "related" company 9-11% of consumed cereals per year. They have common shareholders, the family of the founder of the agricultural holding Igor Babaev (see the cut). In March, co-owner of OOO "Napko" was Evgeny Mikhailov - the top manager of Cherkizovo and the son of Babaev, follows from the data of the Unified State Register of Legal Entities.

Cherkizovo will pay 5 billion rubles. For the net capital of "Napko" and will take over its debt - 751 million rubles. On March 31, 2017. This will not violate the credit covenants "Cherkizovo", said in her message. The transaction was approved by the Board of Directors of Cherkizovo; Its completion is expected in the next 30-60 days.

 In March 2016, the general director of Cherkizovo, Sergey Mikhailov, stated in an interview with Vedomosti that the group did not consider the options for buying land from NAPKO. Now, according to him, the expansion of the land bank Cherkizovo through the purchase of NAPCO will increase "self-sufficiency in grain" and reduce the cost of production in crop production. The "Cherkizovo" strategy presupposes bringing the company's self-sufficiency in grain to 50-60%, Mikhailov reminded "Vedomosti": now it is about 30%, after the deal with "Napko" will approach 50%. In addition, in recent years, "Napko" significantly improved performance, has become a mature business, which can now be integrated into the group, said Sergei Mikhailov. Financial indicators of "Napko" does not disclose.

The price at which "Cherkizovo" acquires "Napko", in terms of the cost of 1 hectare is at the market level, Vladislav Novoselov, managing partner of the BEFL consulting company, believes: "There's just nothing dear here." Considering that the bulk of the land purchased by Cherkizovo is owned by the company, the amount of the deal looks lower than the market, says Dmitry Rylko, director general of the Institute for Agricultural Market Studies. The market price is about $ 850 per 1 hectare, or $ 125 million for all lands, he explains.

In addition, some investors had transactions with related parties (between Cherkizovo and Napko - Vedomosti) and sometimes they were a barrier to investing in the agricultural holding, now this issue will be lifted, Sergei Mikhailov believes. "The fact that Cherkizovo's majority shareholders had projects in the agricultural sector behind the perimeter of the company was troubling; This is one of the reasons why Cherkizovo traded at a discount to Rusagro, for example, "agrees Alexey Krivoshapko, director of Prosperity Capital Management, a minority shareholder of Cherkizovo. "We have always been for such assets to be consolidated at Cherkizovo, and they conveyed this point of view to the company," Krivoshapko adds, the fund basically supports this deal - independent directors voted for it.