Cherkizovo reportedly eyeing up Eurodon

By Vladislav Vorotnikov

- Last updated on GMT

Russian meat giant tipped to continue acquisitions

Related tags: Poultry

Russia’s biggest meat producer Cherkizovo is reportedly eyeing a takeover of another poultry business – agricultural holding Eurodon, following the acquisitions of the broiler holding Belaya Ptitsa and the meat processor Samson in December 2018.

Cherkizovo is considering the acquisition of Eurodon, several sources who wished to stay anonymous told local news outlet Interfax​. Several other Russian news outlets also reported that Cherkizovo might be interested in the takeover, citing sources close to negotiations.

In 2018, Eurodon came close to bankruptcy and was placed under the management of Russian bank Vnesheconombank, to which it owed accumulated debts of RUB26bn (US$450m). The price tag of Eurodon is estimated at around RUB10 billion (US$160m), although the company continues to be loss-making. Vnesheconombank suffered losses of RUB800m (US$12m) by running the company for six months, the bank said in a statement in early 2019.

Russian Business Consulting agency cited several market experts on the actual price of Eurodon’s assets, which it said ranged between RUB3bn (US$45m) and RUB7bn (US$105m). The price is lower than initial estimates because the company has faced problems with the veterinary safety of its poultry complexes, as well as a huge debt load.

Eurodon has been hit with three outbreaks of avian influenza on different turkey farms located in Russia's southern region. In addition to suffering financial losses from the need to cull 200,000 head of turkey as a result of the outbreaks and a consequent halt in production, the company also faced heavy reputational damage, as infected turkey from the company hit grocery shelves in a number of Russian regions.

Eurodon is the second-biggest turkey producer in Russia, with production capacity of 45,000 tonnes (t) of meat per year, according to estimates from Russian consulting agency Agrifood Strategies. Cherkizovo produces 37,700t of turkey meat in Russia in a joint venture with Grupo Fuertes. The biggest turkey meat producer in the country is Damate, with a targeted performance of 88,000t of turkey meat per year.

Vnesheconombank planned to start accepting applications for Eurodon’s takeover on 14 March. However, the bank has not disclosed whether Cherkizovo is among the companies interested in Eurodon, saying only “that there are many interested parties”​.

To be on top

In 2018, Sergey Mikhailov, CEO of Cherkizovo, claimed the company planned to become the biggest player on the Russian turkey market. Mikhailov, however, did not provide any additional details on how the company planned to achieve that goal.

The average retail price of turkey has jumped by 50% over the past year to RUB176.50 (US$2.80) per kg from RUB117.60 (US$1.90) per kg, Cherkizovo said in a statement on its website. However, turkey is still a relatively small sector for the company. In 2018, Cherkizovo earned RUB17.3 million (US$250,000) from selling turkey meat. By comparison, Cherkizovo generated a net profit of RUB6.9bn (US$105m) in poultry meat in 2018. 

Natalia Novopashina, official spokesperson for Cherkizovo, had neither confirmed nor denied whether the company was interested in Eurodon to GlobalMeatNews​ by press time. 

Related topics: Financial, Russia, Poultry

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