OREANDA-NEWS. March 12, 2010. The Cherkizovo Group is set to buy two pork complexes from the group’s main shareholder Igor Babaev. The acquisition will allow the group to increase its pork capacity 30% by 2012, reported the press-centre of OTKRITIE Financial Corporation.

According to a company press release, the transaction is valued at approximately USD 100m, of which USD20m is to be paid in cash. The Group will assume the acquired entities’ outstanding debt, which is expected to be USD 80m.

View: We see the acquisition as positive for the company's operations. The pork segment earns a strong EBITDA margin of 40% and is almost at full capacity at the moment. In 2010, pork production is to increase by about 20% YoY, which could generate an additional USD 9m of EBITDA.

Valuation and Action: Cherkizovo trades at a 38% discount to EM peers. Currently we do not cover the stock.