Soil giant Black Earth Farming has been sold

Since August 2016, the investors are behind Black Earth Farming – one of the largest agricultural companies on Russian soil – on search to a new owner. They found it in the form of a Russian family business. As a result, 224.000 hectares of the famous 'black earth' will change hands.

Black Earth Farming is one of the largest agricultural companies operating in the Central Black Earth region. This concerns land in the Kursk, Tambov, Lipetsk and Voronezh regions. The company's land portfolio includes 244.000 hectares of agricultural land, of which approximately 150.000 hectares are cultivated with wheat, grain maize, barley, sunflowers and potatoes. The acquisition, by family business Volgo-DonSelkhozInvest, involves an amount of 184 million dollars (more than 173 million euros). Converted $754 per hectare. Black Earth Farming announced the news on Monday, February 13.

The Russian Kukura family, which is behind Volgo-DonSelkhozInvest, is acquiring the companies Planalto Enterprises Limited, Agro Invest and Agro Invest Regions from Black Earth Farming. The total transaction value is $200 million in cash, on a debt-free basis. Additional cash and working capital will remain in the hands of Black Earth Farming. Good for about $50 million.

According to Black Earth Farming's chairman - Per Åhlgren - and CEO Richard Warburton, the deal is a better choice than continuing to farm. It provides the best return for shareholders of the company listed on the Nasdaq in Stockholm. Trading in the share was stopped by the Stockholm Bourse on Monday, before the start of the stock market.

Black Earth Farming in numbers (2015):

• 588.000 tons of product from 149.000 hectares.
• Corn, wheat, sunflowers, barley and potatoes.
• 256.000 hectares of which 89 percent is owned.
• 25.000 hectares of leased land.
• 470.000 tons of product storage (of which 17.000 tons for potatoes).
• 109 tractors, 68 combines, 37 sprayers and 175 trucks.
• 14,3 million dollars in revenue (-17,4 million dollars).

During 2016, Black Earth Farming spoke to a number of interested parties regarding the acquisition of the company. In all cases, these were Russian buyers, who offer more money than foreign investors. Volgo-DonSelkhozInvest emerged as the highest bidder and must make a $10 million down payment to seal the deal. The deadline is February 20. It is expected that $185 to $193 million will eventually be available for distribution to shareholders after additional parts have been sold. A meeting will be held in mid to late March to officially confirm the acquisition. The board of directors has now given its approval. The three largest shareholders of Black Earth Farming are investment company Kinnevik AB, pension fund Alecta pensionsförsäkring and GoMobile Nu AB. Also an investor.

The Swedish-British company was already one of the largest agricultural companies in southwestern Russia. The new owner is also no stranger to agriculture. It farms 200.000 hectares and has several grain storage stations. From the region it is possible to export directly via rail and water to the regions in the Black Sea and Baltic Sea.

Photo: Black Earth Farming

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