The deal could ultimately lead to Igor Babayev, who – with other family members – already owns 65% of the Moscow region-based company, to acquire 100% control. However, Russian media reports have suggested that the family may re-sell part of this enlarged stake to strategic investors.
The corporation makes chicken meat, pork and meat products in facilities in central, southern and western Russia. According to data from Russia’s Ministry of Agriculture, Cherkizovo’s 2016 volume sales grew by 9% year-on-year to 903,000 tonnes, while total revenue for the same period increased by 7% to RUB82.4 billion (US$1.3bn). Cherkizovo’s capitalisation is currently estimated at RUB55.66bn (US$929m).
A spokesman for Igor Babayev has already confirmed that the businessman, together with his partners, will complete the deal in the coming weeks. He added that the acquisition would cost RUB1,300 (US$21.70) per share. “Overall, about RUB12bn [US$200m] will be allocated to purchase the shares,” said the spokesman.
The Babayev family holdings are formally held by a fund managed by the UK-based MB Capital Europe investment group, which is itself partly controlled by the family. Minority shareholdings include 4.89% owned by the Norges Bank (Norway’s central bank), while 8% is controlled by Grupo Fuertes, Cherkizovo’s Spanish partner.
Alexey Krivoshapko, director of Prosperity Capital Management, said that negotiations with Igor Babayev had been conducted for about five months, with a significant growth in value of Cherkizovo securities in recent months making the sale attractive. Since early 2017, shares of the group on the Moscow Stock Exchange have risen in value by 69%, while the company’s shareholdings traded on the London Stock Exchange have risen by 63%.
According to Prosperity, the deal will be a subject to approval by the Russian Federal Antimonopoly Service (FAS) – although it is not expected to raise objections – with regulatory permission anticipated next month (August). After this, all other shareholders of the group will receive an offer to sell Cherkizovo securities to the Babayev family at a price not lower than shares sold to Prosperity.
According to analysts from Russia’s Ministry of Agriculture, the consolidation may actually enable the Babayev family to re-sell part of the group to a strategic investor. Earlier this year, Russian media reported that the Russian Direct Investment Fund (US$10 billion fund established by the Russian government in June 2011 to make equity investments in high-growth sectors of the Russian economy) and Japan’s Mitsui had expressed interest in buying parts of the group. Mitsui is already in discussions over a potential deal with Rusagro, another major Russian meat company.