VEB.RF has difficulties with the sale of the formerly second turkey producer in the country, Eurodon Group of Companies. The bank planned to make about 10 billion rubles for the asset, but potential interested parties, including the Cherkizovo group and the Damate group of companies, were ready to deal only with a discount of more than 50%. Now Eurodon may go to the Agricultural Bank (RSHB). Key players themselves will increase turkey production, and it will be difficult to sell them an asset at a reasonable price for the bank.
The fact that the sale of Eurodon to potential investors has stopped is reported by two sources of Kommersant in the market. The seller - VEB.RF - refused to all interested, referring to the low bid, explains one of Kommersant's interlocutors. Eurodon was the second largest producer of turkey in Russia after the Damate Group Naum Babaev and Rashid Khairov. According to Agrifood Strategies, in 2018 the group produced 45 thousand tons of turkey meat in slaughter weight, occupying 17% of the market in kind (259.08 thousand tons). At the end of 2018, as a result of a corporate conflict with the founder of Eurodon, Vadim Vaneev, VEB.RF, the main owner and creditor of the group, gained control over this business. After optimizing production, the bank wanted to sell the asset to a strategic investor. VEB.RF planned to decide on a buyer in the spring of 2019.
A source close to VEB.RF, Kommersant said earlier that the bank wanted to help out about 10 billion rubles for Eurodon. According to Kommersant’s interlocutors who were familiar with the sale, Damate, the Cherkizovo group of the Mikhailov family (releasing a turkey under the Pava-Pava brand), as well as the Stavropol Resource agribusiness group Victor Nauruzov were interested in the asset. Eurodon was planned to be sold to the investor who offered the maximum price. But, according to a Kommersant source, the interested parties offered no more than 4 billion rubles for the asset.
Senior analyst at Gazprombank Marat Ibragimov said that more than 50% is too high a discount for Eurodon, a level of 10-30% would be normal. “Either investors are trying to bring down the price, or the asset has some problems,” he said. Potential buyers understand that this is a non-core asset for VEB, and therefore requested such a discount, agrees Buc & Company’s senior adviser Igor Buchatsky.
According to a Kommersant source, now Eurodon can be transferred to the RSHB. VEB.RF is negotiating the transfer of claims for loans to Eurodon of the RSHB, Kommersant confirmed in a state corporation. They consider it right to consolidate assets at a specialized institution, where the main competence of the state in financing agriculture is concentrated. The RSHB also confirmed that they are negotiating the purchase of requirements for Eurodon for the further resumption of turkey production at the group's enterprises. A final decision has not yet been made, the representative of VEB.RF emphasized.
According to a Kommersant source on the market, it is easier for existing players to build their own new sites, which will be organized according to their standards, and not according to Eurodon standards. The group has repeatedly experienced outbreaks of bird flu since December 2016: more than 1.5 million animals died, and losses exceeded 2.5 billion rubles. According to forecasts by Agrifood Strategies, in 2019 the volume of the Russian turkey meat market will grow by about 30%, to 340 thousand tons. “Damate” plans in two years to increase its turkey production capacity by 1.5 times, up to 155 thousand tons per year. Cherkizovo told Kommersant that, since the situation with the purchase of Eurodon remains uncertain, the group decided to expand the project for the production of turkeys by about 50%, to more than 80 thousand tons per year. The "Damat" and "Resource" declined to comment.
Stanislav Volkov, Managing Director for the methodology of the National Credit Ratings rating agency, notes that VEB receives on average more than 100 billion rubles. subsidies per year, and the successful sale of Eurodon for 10 billion rubles. and refinancing at least part of his debt to VEB in a commercial bank would significantly reduce state support. In general, he notes, the sale of non-core assets from banks in Russia today is not easy, even if the bank itself provides credit to the buyer.