The deal has been assessed at the level of 33.28 million euro.

Russia: GC Rost acquires Belgorod greenhouse Teplitsy Belogorya

The Russian greenhouse company MC Agrokapital, which is part of the group GC Rost, has acquired greenhouse company Teplitsy Belogorya. According to a local website Kartoteka.ru, general manager of the Tachnologii Rosta company, Ms. Tamara Reshetnikova assumed that Teplitsy Belogorya was most likely sold at a price lower than the market one.

Teplitsy Belogorya company was founded in 2011. The enterprise is located in the south of Belgorod region and produces lettuce, tomatoes, cucumbers and rcoket. According to the company's own data, the complex occupies the territory of 38 ha, of which the greenhouse acreage comprises 18.9 ha. Foundation capital equals 312 thousand euro. In 2020 company profit barely reached 6 million euro, with that the losses amounted to 6.4 million euro. By April 2021, Teplitsy Belogorya had accumulated 173 thousand euro in unpaid salaries, reported the press service of the regional public prosecutor’s office.

The desire of GK Rost to buy out the loss-making Belogorie Greenhouses became known back in July 2020. At that time, Ovoschi Dalnego Vostok LLC, registered in the Khabarovsk District (a member of the Rost Group), applied to the Federal Antimonopoly Service with an application. According to the FAS decision, the company was approved to buy 100% in the authorized capital of the Belgorod enterprise.

According to Ms. Reshetnikova, Teplitsy Belogorya have concluded a profitable deal as GC Rost has an extensive experience in practical management. “The deal is of significance for the latter, as previously they barely had any complexes in Belgorod region. The company, aiming at active development has acquired about 19 ha of greenhouses and therefore has become a leading Russian horticultural company in cucumber gross yield,” shared the expert.

According to a representative of Ernst&Young company, Mr. Maksim Nikitochkin, the difficulties of Teplitsy Belogorya were related to the high leverage and the fact that most plants had perished because of pests and diseases three years before, as the result of which the company did not get a significant part of the expected profit. Physical assets, according to the expert, are in a good condition, the company took timely measures to renew the lighting system. “The deal can be of significance for GC Rost in case the complex is purchased at a low price and effective crisis management is implemented. Belgorod region cannot be called the most favorable for horticulture”, shared Mr. Nikitochkin. “Teplitsy Belogorya could become a major vegetable supplier to Belgorod and Kursk regions in view of the fact that main greenhouse complexes of the Central Federal District are located in other regions: Moscow, Lipetsk and Kaluga ones. It is possible to arrange export to the neighboring regions of Ukraine as well.”

Moreover, according to the expert, the situation in horticulture in Russia is rather challenging. The prices in 2016-2018 have been stagnating because of gradual market saturation but in 2019-2020 they increased by 10-15%, allowing the growers enhance profitability, which previously in many cases was equal to zero. “As the result, a number of horticultural enterprises are undergoing bankruptcy and consolidation procedures, a part of them are still collaterized and therefore cannot find an interested buyer”, shared Mr. Nikitochkin. The expert also noted that last year has been noted for a number of deals apart from the one in question: GC Rost with Dolina Ovoschey and selling of agricultural complex Yuzhny by AFK Sistema.

The representative of SRG company, Mr. Ilya Telyatnikov shared that the deal is in line with the GC Rost strategy on acreage expansion with the idea of occupying a leading position in the Russian horticultural market. The deal will allow the company expand the assortment of produce as well as the regional brand presence, considers the expert.

He also reminded that there are several contemporary greenhouse complexes in Belgorod region with the overall acreage of 100 ha. According to the regional Department of Agricultural and Industrial Complex, the region produces over 30 kilos of fresh vegetables per person per year, which is twice as much as needed. According to the Federal State Statistic Service, about 30% of the produce is exported to other regions and countries, which means that the local market is saturated and with the production intensification expansion to other regions will be required.

According to Mr. Telyatnikov, in the conditions of growing competition horticultural industry in Russia should be expecting further consolidation. “As the practical experience of the past year has demonstrated, bigger companies are more competitive than local ones as they have bigger trade opportunities as well as possibilities to change output composition adapting quickly to the market changes. Moreover, such companies can implement new technologies faster and with smaller cost per unit,” concluded the expert.

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