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Iurii
Contributor

The Cargill-Ukrlandfarming deal

Recently I have been asked to make a comment about the buyout of the biggest (by the area leased) Ukrainian Ag company UkrLandFarming by Cargill. The news was:

 

In March J.P. Sottile wrote about the economic interests of large transnational corporations in Ukraine. In addition to corporate agricultural giant Cargill’s buyout of UkrLandFarming, the world’s eighth-largest land cultivator and second biggest egg producer…

http://www.infowars.com/joe-bidens-son-appointed-to-board-of-ukraines-largest-gas-producer/

J.P. Sottile concluded that “Despite the turmoil within Ukrainian politics after Yanukovych rejected a major trade deal with the European Union just seven weeks earlier, Cargill was confident enough about the future to fork over $200 million to buy a stake in Ukraine’s UkrLandFarming. According to Financial Times, UkrLandFarming is the world’s eighth-largest land cultivator and second biggest egg producer. And those aren’t the only eggs in Cargill’s increasingly-ample basket.”

 

Oleg Bakhmatyuk, the owner of Ukrlandfarming, also owns the Avangardco that is listed on the London Stock Exchange (tag AVGR:LI). In September 2011, in order to restructure and rationalize his ownership in agricultural assets Mr. Bakhmatyuk made a decision to transfer his 77.5% shareholding in Avangardco IPL to Ukrlandfarming PLC.

The deal between Cargill and Ukrlandfarming had been settled in late December, 2013. The S&P rating for Ukrlandfarming at that time was B- (more vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments). The real turmoil in Ukraine began in February, 2014. Now the S&P rating for Ukrlandfarming is CCC (Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments).

Since January, 1, till now the share price for Avangardco dropped from $11.75 to $8.75.

There was no buyout of UkrlandFarming by Cargill. Cargill bought only 5 percent packet of shares for $200 million which means that capitalization of Ukrlandfarming at the time of the transaction was $4 billion.

According to the agreement between ULF and Cargill the latter has the priority right to buy from ULF up to 1.5 million mt of grain. At the same time Cargill is not inclined to interfere into the ULF management.

In July, 2013, Mr. Bakhmatyuk expressed his desire to go to IPO on London Stock Exchange and Hong Kong Exchange to sell 20-25 percent (combined) of ULF shares during the next two years.

The latest news about Oleg Bakhmatyuk includes police investigation in Austria concerning 35 million euros laundering. The second news was about UFL problem to pay off the $600 million debt to one of the Russian banks.

Not long time ago one of the Ukrainian financial analyst called Mr. Bakhmatyuk business strategy as expansion using the borrowed money.

Just few words about the situation in Ukraine.

The expanding terrorism in the South-East Ukraine threatens to stop the business there. Recently the so-called governor of Lugansk oblast banned the activity of American companies there such as Coca-Cola, Pepsico and McDonald’s. The plundering, kidnapping, violence has become the everyday life in the region. Businesses just run away from there.

By the way, Cargill owns a big oilseeds crushing plant in Donetsk.

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5 Replies
booked
Veteran Contributor

Re: The Cargill-Ukrlandfarming deal

thanks for the info lurii, and thanks marketeye.

 

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marketeye
Veteran Advisor

Re: The Cargill-Ukrlandfarming deal

booked,

 

He's your man. We're very fortunate to have Iurii contributing to our discussion groups and the Your World In Agriculture page.

 

Thanks for your help too in making this site so successful.

 

 

Mike

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bruce MN
Advisor

Re: The Cargill-Ukrlandfarming deal

This was posted on the forum page and received sparse and mixed responses: http://m.startribune.com/opinion/?id=258704471&c=y
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Palouser
Senior Advisor

Re: The Cargill-Ukrlandfarming deal

Looks like the rebelious areas see advantage of Russia's business model. Take over the government, get rid of competition by fiat and then divide up the spoils among the insider oligarchy. A stripped down free enterprise system that doesn't tolerate more than token competition to the monopoly/political cabal.

 


The US moves much more slowly.

OlenaRoy79
Friend

Re: The Cargill-Ukrlandfarming deal

Is there any explanation why Cargill never reported about the 5% acquisition on their corporate web-site? I checked everywhere on their main and sattelite sites and there is virtually NO direct mentioning of UkrLandFarming..

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