Political risk hasn't scared off all investors looking for yield-rich capital placement in emerging market such as Ukraine's.
The nation’s ongoing crisis, exacerbated by Russia’s war, has pushed the value of Ukrainian assets to critical lows, making them attractive for those who look for opportunities to inject money and obtain promising corporate stakes in a risky bet on big future profits.
The benchmark index of an equity trade platform Ukrainian Exchange alone fell by 19 percent since July, indicating the decrease in value of the local companies.
During a visit to the U.S. on Sept. 26, Ukrainian Prime Minister Arseniy Yatsenyuk invited American businesses to dare and invest more actively in Ukrainian assets, while U.S. Commerce Secretary Penny Pritzker during her visit to Kyiv on Sept. 27 emphasized that agriculture and energy sectors as of special interest for American investors.
Westinghouse, a Pennsylvania-based nuclear energy company, expressed interest in purchasing a 40 percent stake in Energoatom, the state-owned operator of Ukrainian nuclear power stations, analyst Yuriy Korolchuk told the Kyiv Post. However, Westinghouse will invest only after it receives a legal right to build new blocks on the local nuclear electricity makers.
Here is the list of the most notable acquisitions that have already been finalized this year or are currently on a late stage of the deal.
1. Austria-registered AMIC Energy Management GmbH bought the Ukrainian branch of Lukoil, a Russian oil company, which controlled 6 percent of the local gasoline market with 236 stations. Both sides of the deal did not disclose the price, although Oleksandr Sirenko, an analyst at Upeco consultancy, estimates it at $250 million, while Myroslav Tabaharnyuk of MT Invest thinks it’s $300 million.
2. Russia’s insurance giant Rosgosstrah sold Providna, a major Kyiv-headquartered insurer, to a Luxembourg-registered private equity fund that manages assets of a pool of Western European investors. Ukraine remains a substantially underinsured country with insurance expenditures per capita four times smaller than in the European Union. The whole industry contributed just 1.6 percent to the nation’s $175 billion gross domestic product in 2013.
3. Concorde Capital, an investment company whose key shareholder Igor Mazepa is running for parliament, and owner of the eyeglass chain Luxoptyka Oleg Kalashnykov, acquired 80 percent of Dobrobut that manages seven medical treatment outlets in Kyiv and one in Donetsk. Analysts say the price of the stake at medical service provider doesn’t exceed $18 million, while nation’s medical market is estimated at $12-13 billion.
4. Dmytro Firtash’s Group DF paid $94 million for Pravex, a bank, to Italy’s Intesa Sanpaolo, a $500 million discount compared to what Italian banking group paid for the bank to Kyiv’s ex-mayor Leonid Chernovetsky. Analysts foresaw Firtash would merge Pravex with Nadra, another bank that he owns, but as of now he has not done it amid criminal prosecutions for bribery claimed by the U.S.
5. Terra Food, a diary maker with $315 million of revenue and $38 million of earnings before taxes in 2013, is buying 86 percent of Trostyanets Milk Factory from its previous owner Milk Alliance. Factory in Sumy Oblast will become group’s eleventh production center.
6. KVV Group, local metal scrap collector that belongs to the British Gefest Investments Limited, is purchasing Latvia’s insolvent Liepajas Metalurgs, a steel maker, for $136 million. For the deal to be officially recognized by Latvian authorities, KVV Group is obliged to restore the production in 2014.
Kyiv Post associate business editor Ivan Verstyuk can be reached at [email protected].
