March 27, 2014

Cherkizovo becomes Russia's largest poultry producer with acquisition of Lisko

Cherkizovo Group announces the acquisition of LISKO Broiler, a poultry producer in the Voronezh Region in Southern Russia, which will make Cherkizovo Group the country's largest poultry producer, with production capacity exceeding half a million tonnes live weight per year.

LISKO Broiler is the largest poultry producer in the Voronezh Region and one of the market leaders in the Central and Southern Federal Districts. Based on Russian Poultry Union data, LISKO ranks seventh among top poultry producers with a 2% nationwide market share. Its production capacity is approximately 95,000 tonnes (live weight) per year.

LISKO's full-cycle production assets that will be integrated to Cherkizovo Group include: seven poultry production facilities; four parent flock sites with a slaughtering facility of 4,000 heads per hour; two reproduction flock sites; Slaughtering complex with capacity of 9,000 heads per hour; Hatchery with capacity of 80 million eggs per year; feed mill with 40 tonnes per hour capacity; grain storage facility with overall storage capacity of 100,000 tonnes; Meat and bone meal production facility; and rendering facility. LISKO's production facilities are built in accordance with modern standards. 

"We have made a major step towards market leadership, which is in line with our long-term strategy combining organic growth and M&A. Acquisition of LISKO not only gives us strategic advantages, such as increasing the scale of our business and access to Southern Russian markets, including a synergy effect that we will feel even in the first year of integration. LISKO's facilities are located in Voronezh Region, where Cherkizovo has a land bank, and this gives us an opportunity to build a vertical integration chain. Leveraging on Cherkizovo's distribution capabilities will help to increase market access for LISKO's products and save on logistics. We have acquired a quality asset at a price below the replacement value, and I am sure this deal will be beneficial for both our shareholders and customers", Cherkizovo CEO Sergei Mikhailov said.

The deal is based on an enterprise value of approximately RUB5 billion (US$140 million) for LISKO Broiler, including debt. Cherkizovo Group will assume the acquired company's debt; equity will be financed through the company's own funds.

Cherkizovo Group is the largest meat manufacturer in Russia and one of the top three companies serving Russia's poultry, pork, and meat processing markets. The company is also Russia's largest producer of fodder.