Breeders from Cherkizovo Group

June 13, 2012

Cherkizovo Group is to expand into pig breeding as it buys a swine nucleus unit. The Group’s founder Igor Babaev is the seller of this structure.

Cherkizovo Group is to buy the swine nucleus unit in the Voronezh region, one of the meat market participants familiar with the terms of the transaction said to Vedomosti. The group is to buy Voronezhmyasoprom, confirmed the source of information at Cherkizovo. According to him, the deal amounts to 4.5 billion roubles, including debt (about 50% of total sum). The acquired assets are the swine nucleus unit for 2500 sows and some tens of thousands hectares of farmland. Executive Director of Miratorg, Alexander Nikitin suggested that the transaction was completed at market rate.

According to SPARK, 99.9% of Voronezhmyasoprom belongs to the National Agro-Industrial Company. Its joint owners are the beneficiaries Cherkizovo Group — Igor Babaev and his family. The buying will enhance business efficiency at Cherkizovo Group. Currently on the market there is lack of quality breeding stock, in addition to restrictions on the importation of live cattle from the European Union which were imposed at Rosselkhoznadzor in March 2012, says our interlocutor.

The transaction was approved by independent members of the Board of Directors of Cherkizovo Group and an independent law firm who conducted an audit, he adds. The Group’s interests lie in breeding and genetic work, because it improves the biological safety and increases the stability of business development, said Board member of Cherkizovo Group, Alexander Kostikov, who has declined to comment about the possible deal.

For the pork production on an industrial level it is necessary to have three generations of producers: parent stock (whose offspring are grown for slaughter), grandparent stock (to replenish breeding stock) and 1–2% of pigs with the best breeding traits that are selected for the production of progenitors.

Russian companies are buying grandparent stock from Western companies PIC, Topigs and DanBred, says a representative of one of the largest pig-breeding companies in the country. But the majority of owners of complexes of 5000 sows try to produce grandparent stock themselves, says Executive Director of the Russian company Topigs Dennis Okhrimenko. For example, Miratorg has three generations of producers, according to an employee.

According to his calculations, 2500 heads of grandparent pigs, which are made on the basis of Voronezhmyasoprom, can produce about 50,000 pigs per year. A quarter of them will be able to go on to form the parent stock. The parent stock Cherkizovo Group is about 25,000 sows (data at the end of 2011).