PKB Korporacija-SOLD
Sale of the largest farming company in Serbia

Update notice 14th Septembe 2018:

Serbian PKB Corporation has been sold to the Abu Dhabi headquartered Al Dahra Holding for €112,5 million. Al Dahra offered €104,5 million for the assets plus the value of the livestock at the date of the formal takeover of the Company. The value of the livestock is estimated about €7 million.

1. About the company

The Government of the Republic of Serbia holds 100% shares in PKB, the largest single farming company in Serbia (“the Company”). The Government announced on 18th January 2017 its intentions to sell all its interests in the Company including 4 out of 7 Company’s subsidiaries. The Company carries on the business of primary agricultural production on a large scale. All production capacities are in the proximity to the Serbian capital city Belgrade, the largest consumer centre between Vienna and Athens.

It has 30,000ha of agricultural land under management, 23,000ha is owned and the rest is under a perpetual lease which could be converted to ownership; 5,500ha is fully irrigated. About 300ha of the Company’s land is classified as “construction land”. Two years ago it sold 5ha of such land for €700.000-€1 million per hectare to the German supermarket chain Lidl Serbia and some other buyers. The Company’s vast assets also include farmhouses, storage facilities, machinery and equipment (tractors, combines, loading machines etc), a research centre, quality control labs, agricultural aviation fleet and sizable livestock of 20,000 cattle, 3,500 pigs and 1,600 sheep.

It produces 160 million litters of raw milk, 140,000 tonnes of cereals (wheat, corn, barley etc), 90,000 tonnes of industrial crops (soybean, sugar beet etc) 2,400 tonnes of various seeds (corn seed, soybean seed etc), meat (beef, veal, lamb and pig meat) and greenhouse vegetables. It employs 1.742 staff.

Because of its size the Company would be able to meet quality and quantity demands by supermarket chains like no other producer in Serbia or to export such products to large markets that demand continuing and reliable quantity and quality supplier (Russia, for example, with which Serbia has a Free Trade Agreement).

2. Financials in brief

In 2015 it had a total consolidated revenue of €43.7 million and operating revenue of €39.6 million (the 2016 annual accounts are not available yet). It incurred a net loss of €11.7 million in 2015, a swing from net profit of €19.4 million in 2013. On the positive side, it reduced its long term liabilities from €25.3 million in 2013 to €15.8 million in 2015. It also reduced its short term liabilities from €58.2 million in 2013 to €43.2 million in 2015. Reportedly, the liabilities were further reduced in 2016 but this remains to be seen when the 2016 financial results are made available shortly.

The Company has lost vital food processing capacities through earlier privatisation of its food processing subsidiaries which add value in the food production chain- milk processing dairy, frozen food processing, retail capacities and some other assets. Subject to further analyses, it is likely that reinstatement of some food processing capacities would increase Company’s profitability through higher level of food processing, instead of being just the primary agriculture producer. It has a recognisable trade mark which can be used on its products that will find their way on the supermarket shelves.

The Company has not been able to unlock the full potential from the assets it currently manages. For various reasons (political meddling in its affairs, mismanagement, theft and misappropriation of assets, unreasonable and counterproductive sale of value adding subsidiaries etc), it has underperformed. It would benefit greatly from better management, financial and managerial planning and stricter cost control.

Company’s restructuring and modernisation could be financed from the sale of some of the “constriction land” mentioned above to property developers. The sale of the same asset could offset the initial cost of the acquisition and offers an opportunity for a leveraged acquisition resulting in a higher return on the invested equity capital. We can advise on structuring such transaction and assist in raising the debt part of the acquisition.

It is a unique acquisition opportunity for a strategic (trade) investor or for an investment fund specialising in agricultural investments.

3. We can

  • Carry out due diligence and provide various analytical reports about the Company such as production and operation analyses, capex investment analyses, sensitivity analyses, scenario analyses, Monte Carlo simulation, linear regression and correlation analyses etc
  • Value the company and/or its assets
  • Prepare restructuring programme
  • Advise on tax holidays, government subsidies and grants, relief from customs and excise duties and other similar benefits
  • Advise on Company’s tax assets and liabilities and how best to structure and use them in acquisition
  • Prepare acquisition strategy
  • Assist in raising the debt part of the acquisition finance
  • Assist in drafting proposal and offers to the Government of Serbia
  • Advise in negotiations throughout the acquisition process
  • Advise in negotiation with banks and other commercial creditors when and if necessary
  • Advise on the post-acquisition integration, implementation of the restructuring plan, financial planning and budgeting, performance and profitability improvements, financial management, putting company back on the profitable path

We offer “one stop shop” approach to all investors’ needs whether financial auditing, legal, technical, environmental or any other advice, project management, or dealing with the national or local authorities, advising on tender documentation, valuation, due diligence execution, data room attendance, documentation and company analysis and similar. We will suggest or select (and you will approve, if so wish), organise and manage all additional advisors which may need to be involved, such as lawyers, real estate valuers or accountants.

February 2017 

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