Agroholdings go south

High prices for agricultural land in the south of Russia do not discourage some market participants from expanding into these regions. So, “Bio-Tone” of the head of the Union of Grain Exporters Eduard Zernin became the owner of the Stavropol economy with more than 15 thousand hectares of land with an estimated value of up to 2.5 billion rubles. Decrease in profitability in crop production can lead to an increase in sales of small farms.

“Bio-Tone” of the Chairman of the Board of the Union of Grain Exporters Eduard Zernin became the owner of LLC “Agroindustrial Corporation” (APC) in the Stavropol Territory. Changes to the Unified State Register of Legal Entities were made at the end of December 2022, Kommersant drew attention.

The agro-industrial complex is engaged in crop production and milk production, local media wrote. At the end of 2017, in a message about the opening by the district office of VTB to the enterprise of a credit line of 100 million rubles. the land bank of the agro-industrial complex was estimated at 15.5 thousand hectares, and livestock assets – at 1.2 thousand heads of cattle. Eduard Zernin told Kommersant that Bio-Ton is buying the entire agro-industrial complex business and plans to deal with the economy, taking into account the prospects of the local market. On January 8, “Kommersant” failed to contact the representative of the agro-industrial complex.

Bio-Tone calls itself the largest sunflower producer in the country. It also grows wheat, corn, barley, peas, etc., develops flour-grinding production. The land bank is about 500 thousand hectares in the Volga region, which, as of July 2022, corresponded to the seventh place in the ranking of the largest latifundists according to BEFL. The revenue of Bio-Tone Company LLC in 2021 increased by 20.9%, to 10.97 billion rubles, net profit was 4.63 billion rubles.

For Bio-Ton, the purchase of the agro-industrial complex will be the first deal in the south of Russia. The director of Sovecon, Andrey Sizov, estimates the cost of agricultural land in the Stavropol Territory at 100-160 thousand rubles. for 1 ha. Thus, 15.5 thousand hectares could cost 1.55-2.5 billion rubles. According to a Kommersant source in the market, Bio-Tone is now considering the south of Russia for expansion. Mr. Zernin noted that Bio-Ton is constantly looking at assets in the south, in the center of the country, and in the Volga region.

Investment banker Ilya Shumov says the Stavropol region remains one of the regions dominated by a large number of independent farms, and the share of the largest landowners in the region’s revenue remains low. There are now many offers on the market for the sale of land assets in the Stavropol Territory, but due to the increase in the profitability of crop production, sellers have dictated market conditions in recent years and prices for such assets have been kept near the upper ranges, he points out. Thus, Mr. Shumov continues, individual allotments have been sold for several years, and due to the overestimated expectations of the owners, they are never realized.

Director General of the Institute for Agricultural Market Studies Dmitry Rylko notes that the supply of land assets in southern Russia is growing, but prices show no signs of decline. According to him, the price tag supports the expectation of the majority of market participants to restore profitability, as well as active interest in agricultural land from non-core investors. So, in December 2022, the structure of the owner of the AEON corporation, Roman Trotsenko, outperformed three other applicants, bought from the Trust bank the enterprises of the Rostagro agricultural holding with 240 thousand hectares of land in the Penza and Saratov regions for 18.76 billion rubles. at an initial price of 14.4 billion rubles.

Analysts at Technology Trust (formerly PwC Russia) noted that the mergers and acquisitions (M&A) market in the agricultural sector in 2022 was very active mainly due to the desire of foreign companies to leave the Russian Federation, as well as restrictions on the free movement of capital and accumulation liquidity within the country. According to Ilya Shumov, in 2022 the number of M&A transactions in the agricultural sector decreased from 57 to 40 year-on-year, and the volume in money decreased by 15%, to $2.5 billion. The key drivers were the sale of land assets, including the lands of the South Rusi”, Czech PPF Group, etc. According to Ilya Shumov, in the next two years, crop production is expected to reduce profitability, which may cause the sale of small farms, reduce sellers’ appetites and accelerate market consolidation.

Anatoly Kostyrev