SET-listed Charoen Pokphand Foods Plc (CPF) has reached an agreement to acquire the entire stake in a major integrated poultry business in Russia for US$680 million in a bid to expand into potential new markets across the food chain.
Under the plan approved by CPF's board, its wholly owned unit in the Netherlands will buy shares from Agro-Invest Brinky BV in CJSC Poultry Production Severnaya (S) and CJSC Poultry Parent Stock Production Woyskovitsy (W).
The shares will be held by a holding company that CPF Netherlands BV will set up to manage the business in Russia.
The purchase will be done via two transactions that would see CPF Netherlands acquire an 80% interest by the end of this year, with the remaining 20% bought by the end of 2018.
Based on the present exchange rate of 1.6567 roubles to the baht, S and W's enterprise value is 23.8 billion baht.
S and W operate an integrated poultry business in Russia, engaging in the production of feed, breeding of parent stock, hatching, boiler houses and primary processing.
Last year, the two firms generated consolidated sales equal to 10.2 billion baht for a net profit of 3 billion.
The deal follows CPF's purchase of a Russian pork business in 2013.
CPF operates feed mills and swine farms in Russia, which has a supply shortage of both pork and chicken due partly to the country's ban on imports from the US and Europe.
"We believe the acquisition will pave the way for CPF to expand further in Russia, which has significant growth potential for meat consumption, as S and W are among the top five local players," said Adirek Sripratak, CPF's president and chief executive.
He said given the market share of 5% for the two firms, CPF would realise immediate benefits from the acquisition, with a strong footprint across the St. Petersburg and Moscow areas.
The Russian market consumes 3.7 million tonnes of chicken meat with 500,000 tonnes of imports, while pork production in the country amounts to roughly 3 million tonnes.
Russia's population of 144 million provides S and W an ideal platform for further growth in a relatively fragmented poultry market with no dominant players and potential consumption growth, Mr Adirek said.
He said CPF had been in talks to acquire food processing companies to add value to its meat business in Russia including products such as sausages.
The company is also looking into meat export opportunities from Russia.
"The investment is in line with CPF's strategic plan to focus on its core business and diversify its geographical presence internationally," Mr Adirek said.
CPF has invested in 14 countries including five Asean members and has offices in Singapore, Turkey, India and Taiwan.
The company exports to 40 countries. In 2014, roughly 35% of CPF's total sales of 430 billion baht were generated from the Thai market, with 65% from abroad including 6% direct exports from Thailand.
He said Africa, with a population of 1.1 billion, was another potential market for CPF.
The company has already started a small feed mill and terrestrial business in Tanzania.
CPF shares closed yesterday on the SET at 21.30 baht, up 10 satang, in trade worth 246 million baht.