Agriculture

Kernel Holding [KER PW, HOLD], a major Ukrainian sunflower oil and grain exporter, has announced that it has executed its option agreement and purchased a 94% stake in Allseeds, another major sunflower oil producer in Ukraine. According to KER’s announcement, the preliminary EV for Allseeds is USD 210 mln. The final sum is subject to adjustment depending on Allseeds’ audited 1Q2010 results, which will become available by the end of 2010. Currently KER is incorporating Allseeds’ key assets into the company’s own accounting structure. On August 10, 2010 an EGM is scheduled at Allseeds, and one of the issues on the agenda is the disposition of assets.

VTB Bank (Kyiv) may suggest that the London Stock Exchange (LSE) exclude Avangard’s [AVGR LI] DRs from listing. VTB Bank believes that Avangard and other entities associated with Mr. Bakhmatyuk might have violated business ethics principles. The underlying reason for this belief is a USD 27 mln loan that the companies refuse to return. The bank started court lawsuits in October 2009 to recover the above-mentioned debt.

Ukrzernoprom Agro/MCB Agricole [4GW1 GR, BUY] has started harvesting campaign on farms in the Crimean and Odessan regions. According to the company’s forecast, the total yield of early crops is expected to be 195 thsd tonnes. In particular, the wheat harvest is projected to be 110 thsd tonnes; rapeseed, 27 thsd tonnes; winter barley, 24 thsd tonnes; spring barley, 16 thsd tonnes; winter rye, 8 thsd tonnes; mustard, 4.5 thsd tonnes; peas, 4 thsd tonnes; and soybeans, 1 thsd tonnes.

A.Verevsky, the Chairman of Kernel Holdings [KER PW, HOLD] has decreased his interest in Kernel by 9.42%, from 50.65% to 41.23%, through the selling of 6.9 mln ordinary shares of Kernel in connection with a derivative transaction with a London based bank. The official purpose of the transaction is the continuation of Mr. Verevsky’s personal financial diversification. He states that it will not affect his management responsibilities at the company, and his chairmanship of Kernel will remain his main activity for the foreseeable future. To confirm this statement he has voluntarily locked-up further disposals of shares in Kernel for a period of 18 months.

Kernel Holding [KER PW, HOLD], a major Ukrainian sunflower oil and grain exporter, has announced that it will purchase 99.2% stake in Kirovohradoliya from Allseeds. Kirovohradoliya holds the most valuable assets of the Group and produces almost 80% of Allseeds’ total output. Formally, the buyer is Kernel Capital LLC. In June, Kernel entered into an option agreements with Allseeds’ minority shareholders for the purchase of 56% of Allseeds at USD 42 mln, and in February, for another 37.6% at USD 18 mln (according to our estimations).

The Ukrainian Minister of Agrarian Policy has announced that the Russian Ministry of Agriculture will allow Ukrainian sugar producers to export up to 300,000 tonnes of beet sugar to Russia beginning in 2011.

The International Financial Corporation (IFC) has decided to lend USD 50 mln to Myronivsky Hliboproduct (MHP) [MHPC LI, HOLD], a major poultry producer in Ukraine, and to partially guarantee the leasing of machinery for up to USD 18 mln. MHP will use these funds to expand its land bank by 120 thsd ha and to purchase machinery.

The European Bank for Reconstruction and Development (EBRD) is going to lend USD 25 mln to Mriya Agroholding [MAYA GR, BUY], a major Ukrainian crops producer. The final decision will be made at the Board of Directors’ meeting scheduled for July 6. The loan may be provided for the replenishment of working capital.

Astarta [AST PW, BUY], a major agroholding with an emphasis on sugar production, plans to increase its sugar mills’ processing capacity by 28.6%, to 27 thsd tonnes of sugar beets, by the start of the 2010/11 season (September 2010–August 2011). This increase in capacity will result from a reconstruction program for all mills. This program’s implementation during a new season makes the holding likely to launch its Veselopodilsky sugar plant, which sat idle during the 2009/10 season.