Charoen Pokphand Foods Plc (CPF), the SET-listed flagship of the CP Group, will pay 3.15 billion baht for a 83% stake in Russia Baltic Pork Invest ASA (RBPI), a large-scale grain and pork producer in Russia's Kaliningrad region.
Adirek: Deal will diversify risks
Under the deal worth 76.8 million euros, CPF Investment Limited (CPFI), a subsidiary of CPF, will purchase the shares from Capman Russian Fund L.P in the third quarter of this year.
RBPI, which also has operations in Nizhny Novgorod and Penza in the west, is planning to expand its operations to mainland Russia.
The deal is part of CPF's expansion plans in food and into Russia, where it already operates feed mill and integrated swine businesses, said president and CEO Adirek Sripratak.
In 2009, CPF invested 3.5 billion baht to build advanced feed mills and swine farms in Lukhovitsy County.
The investment aims to serve huge demand for meat in the country, at 2.75 million tonnes a year, while local production capacity remains low, leading to imports of some 750,000 tonnes of pork every year.
Mr Adirek said the management team of RBPI is competent and he is confident the cooperation would help increase supply to meet the rising demand.
RBPI's net profit in baht terms was 343 million baht on sales of 1.39 billion baht last year.
CPF projects sales this year to increase by 10-15% from 357 billion baht in 2012. Operations in 12 countries including Russia are expected to contribute 55% to revenue in 2013 thanks to aggressive investment expansion in recent years.
In November 2011, CPF completed a 66.3-billion-baht deal to acquire 74.18% of Hong Kong-listed C.P. Pokphand Co Ltd, which has two main businesses _ animal feed production in China and integrated farm operations in Vietnam _ through CP Vietnam Corporation.
Mr Adirek said the company's board also approved spending 1.2 billion baht to acquire 59.99% of CP-Meiji Co (CP-Meiji), a dairy product manufacturing and distribution arm, from the parent CP Group.
The deal will be carried out through C.P. Merchandising Co, CPF's 99.99%-owned subsidiary.
Mr Adirek said the transaction would be beneficial as it will allow CPF to expand further into downstream food business by investing in a new product category.
"This will help diversify our risks since we currently engage mainly in upstream farming businesses," he said in a statement.
He said the company sees growth potential in domestic and international dairy markets. With capacity increasing by 72% over the past two years, CP-Meiji is ready to capitalise on growth opportunities.
The company offers dairy products _ pasteurised milk, yoghurt, cup yoghurt and drinking yoghurt _ under the Meiji and Meiji-Paigen brand.
Last year's sales were 5.17 billion baht with 206 million baht in net profit.
After the transaction, CPF plans to accelerate the dairy maker's growth through its strong international distribution network.
Moreover, they will jointly promote dairy cattle in order to obtain high-quality raw milk supply for CP-Meiji's production while CPF will also benefit from an increase in cattle feed sales.
Shares of CPF closed on the Stock Exchange of Thailand at 29.75 baht yesterday, up 50 satang, in trade worth 1.22 billion baht.