September 16, 2010

Moscow, Russia – 16 September, 2010 - OJSC Cherkizovo Group (LSE: CHE), one of Russia's leading integrated and diversified meat producers, is pleased to announce the acquisition of a meat processing plant located in the Kaliningrad region.  

Cherkizovo Group has signed a contract to acquire the controlling interest in a meat processing plant, located in the Kaliningrad region. Once acquired, the plant’s production will focus on delicacy products, including smoked products, hams and cooked sausages. 

The acquisition is fully in line with the strategy to increase high-margin production in our portfolio, which is oriented towards the premium price segment of the market. Additionally, the Kaliningrad meat plant is located in a free economic zone, with special customs preferences, therefore enabling effective distribution of value added products in the European part of Russia.  

The transaction was agreed on September 15, 2010, for a total consideration equating to US$4.1 million, of which US$2.4 million will be payable in cash. The Group will also assume the acquired entity’s outstanding debt, which at the time of acquisition was US$1.7 million. Cherkizovo additionally intends to invest about US$2.5 million in the restructuring of this meat processing plant.  

Sergey Mikhailov, CEO of Cherkizovo Group, said: “We have recently taken measures to restructure our meat processing business and reduce costs. The restructuring results are now emerging, with the segment  becoming steadily more profitable this year. This acquisition, ideally located in the Kaliningrad region is fully in line with our strategy to increase efficiency and provide a stable base for our meat processing segment.” 

Cherkizovo Group OJSC is one of the largest Russian meat producers. Its business is organised into three segments: poultry production (four full-cycle poultry production clusters), pork production (five pork production complexes), and meat processing (six meat processing plants). Also, the Group produces its own fodder (two fodder mills), and sells its products through its own three trading houses. Cherkizovo Group enjoys dominant market positions, and its brand portfolio includes leading brands, such as Petelinka, Chicken Kingdom, Cherkizovsky, and Five Stars.