Kernel Group’s acquisition of Eurotek will be felt by international agriculture giants with a presence in Ukraine
A Ukrainian sunflower seed oil producer is close to snapping up a competitor in a transaction expected to establish one of the country’s largest sunflower seed oil producers.
Kernel Group’s acquisition of Eurotek will be felt by international agriculture giants with a presence in Ukraine. Western agriculture companies such as Bunge and Cargill of the United States hold strong positions on the vast sunflower seed and oil business in Ukraine, ranked as one of the world’s largest producers of this oily grain.
Kernel Group announced its plans to acquire Eurotek’s assets last month, with analysts valuing the deal at $100 million. Regulators have already approved of the acquisition, and paper work is being finalized, according to company officials.
Kernel Group hopes the acquisition will help their company boost its sunflower seed processing capacity from “490,000 to 640,000 tons of seed per year.”
Viktoria Oleynik, an expert at APK-Inform agriculture consultancy, said the acquisition is expected to lift Kernel from the fifth spot on Ukraine’s market to second place in terms of sun flower oil production.
Kernel’s spokesperson Nataliya Khvostova said the acquisition will help her company gain a “20 percent share on the Ukrainian refined-bottled sunflower seeds oil market [lifting Kernel’s position] to number two after Cargill, the current leader.”
Eurotek’s principle assets include two sunflower seed oil plants based in Kharkiv Region: Volchansk Oil Extraction Plant and Prikolotnoye Oil Extraction Plant. By acquiring Eurotek, Kernel also inherits 13 grain storage-processing enterprises with storage volume of 650,000 tons, a bread plant, a milk plant, and over 22,000 hectares of rented agricultural land.
In addition to sunflower seed oil, Eurotek also manufactures soy and rapeseed oil under the Stozhar brand.
Kernel Group produced 122,000 tons of sunflower seed oil from July 2005 through June 2006. The group’s assets include Poltava Oil Extraction Plant, Melovske Refined Oils Plant Streletskiy Steppe and 27 grain elevators in Ukraine with a combined storage capacity of 1.6 million tons. Kernel’s sun flower oil sells under the Shchedri Dar, Liubonka and Kernel Professional brands.
The company is controlled by Andriy Verevskiy, a parliament deputy and member of Yulia Tymoshenko’s Byut Bloc.
Kernel’s Khvostova said the acquisition will also help in negotiations with banks for larger credit lines at lower interest rates, a “strength which Western companies possess.”
Ludmila Zinchenko, general director of Ukraine’s sunflower seed industry advocacy Ukroliaprom, said Eurotek’s shareholders decided to sell out on their sunflower seed business in connection with a 20 percent drop in sunflower seed prices, which caused profit margins this year to tumble.Zinchenko said Kernel has ambitious plans but will face an uphill battle in competing with Western agriculture groups on the market who have better access to working capital, global trading networks and a strong reputation with customers.
