Alpcot Agro's takeover of fellow Ukraine agricutural operator Landkom International could prompt a huge farm sale - of hundreds of acres of land, besides unwanted macnhinery.

The Stockholm-listed group, whose Ukraine landholdings are based in the west of Ukraine, said it regards as a major plus point of the takeover Landkom's ownership of considerable holdings in the same region.

Of the 74,000 hectares in Landkom's land bank, nearly 28,000 are in Ukraine's far-west Lviv oblast, which borders with Poland, and where Alpcot also farms. A further 16,000 hectares are in neighbouring oblasts.

"Western Ukraine is a great region to farm. It has stable precipitation because of the Carpathian Mountains," Katre Saard, one of Alpcot Agro's three founders, who was responsible for setting up the Ukraine operations, told Agrimoney.com.

The proximity of the groups' operations in the area, where some farms from both groups border on each other, will allow the formation of "clusters", and facilitate the achievement of cost savings from reducing duplicated equipment and functions.

'Too small for large scale farming'

However, Alpcot may "could divest… less productive" Landkom holdings in central Ukraine, where deal synergies appear harder to obtain, Ms Saard said.

Landkom has some 4,000 hectares in mid-north Ukraine which it has yet to farm, plus 12,600 hectares in Zhytomyr oblast, in the east of the western region, where Alpcot does not currently operate.

Landkom also controls 6,110 hectares in Crimea, in southern Ukraine, and an area suited by relatively high sunshine levels to crops such as soybeans and sunflowers.

Ms Saard also said that Alpcot might also sell some of the Landkom machinery fleet which it emerged on Tuesday was ageing, and including a considerable number of tractors considered underpowered for the task.

A tour of Landkom sites had found machinery "too small for large scale farming", with much of the John Deere brand which has a "good second hand value in Ukraine and Russia".

While also "older than we like to see", the machinery had been "well maintained", she added.

Cash raised

Separately, Alpcot revealed it had succeeded in raising $20m through a placing of new shares, on which the acquisition was conditional, with the cash in part designed to beef up working capital for the enlarged group.

Landkom itself acknowledged on Tuesday that its own cash flow "remains weak".

The new Alpcot shares were placed with Swedish and international institutional investors at SEK7.0 a share, a premium of 9.4% to their closing price on Tuesday.

However, investors got an early reward for their support when Alpcot stock soared 20% in Stockholm on Wednesday to close at SEK 7.70.

At an exchange rate of 10.8 krona per pound, and deal ratio of 22.16 Alpcot share per Landkom share, this values Landkom stock at about 3.2p.

However, Landkom stock ended in London at an all-time closing low of 2.625p, down 16% on the day.

The deal remains to be cleared by investors in both Alpcot and Landkom, with shareholder meetings scheduled for next month.
 

agrimoney