Ukrainian agribusiness to raise capital – update

UkrLand Farming has announced its intention to sell equity to private investors as Ukraine starts to court foreign investors again.

*adds comment from Voldymyr Lapa, general director at the Ukrainian Agribusiness Club (UCAB), an association for the sector.

UkrLand Farming, a major Ukrainian agribusiness, is in talks with private investors to raise capital for its expansion plans by selling equity.

The company wants to expand its shareholder base and is looking to make distressed asset purchases, in the form of some of its smaller, domestic competitors.

UkrLand Farming also hopes to improve its corporate governance and strengthen its balance sheet with the cash injection an equity sale would provide, and believes its existing shareholders are keen for the move.

There have been efforts recently to rehabilitate Ukraine’s agribusiness sector and its attractiveness as an investment destination in the wake of civil conflict over the Crimea region over the summer months.

The European Bank of Reconstruction and Development recently announced plans to seek investment from 10 of its agribusiness clients and a partnership with the International Fund for Agricultural Development to provide investment, policy and technical assistance to the Central and Eastern Europe region’s agribusiness sector.

The upcoming election of the Rada, Ukraine’s parliament, in two weeks’ time is also expected to result in successes for pro-European political parties. This could help restore confidence in the country’s political situation and some value to its currency – the hryvnia has fallen 32 percent on the euro since the start of the year – locals tell Agri Investor.

But it is still a very challenging environment for investors and farmers alike, according to Voldymyr Lapa, general director at the Ukrainian Agribusiness Club (UCAB), an association for the sector.

“The EBRD and IFC are the most important sources of financing for Ukraine’s agribusiness sector now,” he told Agri Investor. “We really need the financing but I am not sure how far it will stretch across the industry. We are under huge pressure for several reasons: world commodity prices have fallen globally, Ukraine’s low GDP could now mean that farmers’ tax benefits are at risk of being removed to help reduce the budget deficit; local bank interest rates are so high, and the market not favourable for investments from outside of the country – the IPO market is almost completely closed.”

UkrLand Farming has engaged in a range of other financing options recently. American agriculture giant Cargill purchased a 5 percent stake for $200 million in the company in January this year. And the firm issued a €215 million ($275 million; £171 millon) Eurobond in March 2013, which is listed on the Irish Stock Exchange.

The company has also considered an initial public offering, which was postponed this summer due to the country’s civil conflict. UkrLand Farming had hoped to float 20 percent to 25 percent of the company in Hong Kong and London.

UkrLand Farming is one of the larger agribusinesses in Ukraine, focusing on crop and animal farming. The company enjoys a dominant market share in Ukraine’s agriculture sector including 18 percent of the country’s beef market and 6 percent of the grain market.

Additional reporting by Louisa Burwood-Taylor