OREANDA-NEWS. On August 29, 2007 Cherkizovo Group, one of Russia's leading integrated and diversified meat producers, announced it has acquired 100% of the share capital in the holding company of OAO Chicken Kingdom. This follows the initial signing of a Memorandum of Understanding announced on 14th April 2007, reported the press-centre of Cherkizovo Group.

Background to the Acquisition
Cherkizovo listed on the official list of the United Kingdom Listing Authority and was admitted to trading on the London Stock Exchange in May 2006. It is one of Russia's leading meat producers with a strong market position in the meat processing, poultry and pork sectors. The strategy outlined at the time of the initial public offering ("IPO") was to grow the business through both organic growth of its three core divisions and to actively pursue strategic acquisitions that will enable the Group to improve its market share and competitive position.

The Group's current poultry division is one of the largest poultry producers in Russia, and the largest in the Moscow Region [Source: APK Marketing Institute].

Following a review and evaluation of the poultry market in Russia, Cherkizovo has acquired the Chicken Kingdom business. The acquisition will bring additional scale, strong brands and increased market share, provide synergistic benefits, and position Cherkizovo as the clear number one poultry producer in Russia.

About Chicken Kingdom
Chicken Kingdom is the fourth largest Russian poultry producer with a fully integrated poultry production cycle and operations in both Lipetsk and Bryansk regions [Source: APK Marketing Institute]. The company produces chilled and frozen poultry products under the "Chicken Kingdom" brand name (one of the most recognized Russian frozen poultry brands).  Annual volumes last year were approximately 70,000 tons of dressed weight.

This year Chicken Kingdom is expecting to produce over 80,000 tons of dressed weight, whilst the production capacity is expected to reach 100,000 tons per annum by the end of 2007.

Based on consolidated US GAAP Standards, Chicken Kingdom reported 2006 sales revenues of $109 million and EBITDA of $23 million.

Consideration and Funding
The acquisition was funded mainly from IPO proceeds with some additional debt financing raised by the company. The purchase price agreed between the parties was approx $143 million.  This was for the acquisition of 100% of the share capital, certain trademarks of Chicken Kingdom and to retire certain liabilities.

Commenting on the acquisition, Sergey Mikhailov, CEO of Cherkizovo, said: 
"We are delighted to acquire Chicken Kingdom today, which now makes Cherkizovo Russia's clear number one poultry producer.  This is a key step for the business and will, in addition to driving strong organic growth, transform our poultry division by doubling our production capacity.  Today's acquisition has also enabled us to enter new and dynamic regions that present us with excellent opportunities for further growth and strengthen our offering in the central region of the European part of Russia.

"Fundamentally this acquisition gives Cherkizovo the scale, strong brands and market share to further pursue our strategy of continued strong growth in the Russian market.  We will also benefit significantly from the synergies related to combined efforts in procurement of raw materials, warehousing, sales and distribution. 

"We expect to continue to drive further growth for the Group through organic growth of our existing divisions, complemented by opportunities that exist, like today's acquisition, in the ongoing consolidation within our key Russian meat producing markets."

Deloitte Corporate Finance acted as Cherkizovo Group's exclusive financial advisor on this deal.