MOSCOW, May 28 (RIA Novosti) – Food giants Mars and Nestle have been tipped as favorites to buy Ukraine’s leading chocolate firm Roshen, currently owned by likely president-elect Petro Poroshenko, for as much as $1.5 billion.
The candy-maker-turned-politician earlier vowed to sell his biggest asset if elected president, and summoned investment advisors and bankers to assess a best price. Poroshenko’s candy business is estimated at $1.5 billion, experts told RIA Novosti. In 2013, Forbes ranked Poroshenko as the seventh richest Ukrainian in its billionaire list, with a wealth of some $1.6 billion.
The Roshen Confectionary Corporation was ranked 20th in the Candy Industry Top 100 last year, with a total annual production volume exceeding 450,000 tons and revenues to the tune of $1.0 billion, despite profits dropping 20 percent after a year of litigation with Russia’s United Confectioners company.
Roshen has four factories in Ukraine in Kiev, Vinnitsa, Mariupol and Kremenchuk, as well as two plants in Russia’s Lipetsk, a facility in Lithuania’s Klaipeda and one in Hungary’s Budapest. Its sweet products are sold in markets across the former Soviet space and in Eastern Europe.
ROSHEN VS RUSSIAN CONFECTIONERS
Roshen’s revenues plummeted over the past year after a row with Russian health authorities, which accused the confectionary firm of using dangerous ingredients in its products, which led to a ban on the company’s imports to Russia in late July.
In March, Russia froze 2.8 million rubles ($81,000) worth of the company’s assets in its Russian accounts after Poroshenko’s candy firm was caught up in a rights dispute with Russia’s United Confectioners for infringing the trademark on the popular Soviet “Lastochka” brand.
The price tag on the lawsuit against the Ukrainian chocolate maker was 211 million rubles (over $6 million), forcing the company to halt production at its Lipetsk factory until mid-April.
ROSHEN SALE
Ivan Fedyakov, of the Russia-based InfoLine analytic firm, said the deal to sell Roshen will not be finalized any time soon. “The deal won’t be due before 1-1.5 years’ time, if there’s a deal at all. It’s far from easy to find a buyer for such an asset without cutting its price. And Poroshenko is in no hurry anyway,” the expert told RIA Novosti.
He added, however, that Roshen was previously making $290 to $580 million annually in Russia alone. “That’s a considerable amount of money for a manufacturing company, there aren’t many on par with it, so the assets might as well be sold with a premium,” Fedyakov noted.
Rye, Man and Gor (RMG) analyst Ksenia Artyunova suggested the Ukrainian confectionary company will be broken up and sold in chunks. “The price tag on the corporation may reach $1-1.4 billion … It will probably be sold in bits,” she said.
Prosperity Capital Managing Director Alexei Krivoshalko bumped the valuation even higher, citing Rochen’s net profit which is expected to rise to some 100 million dollars by the end of the year. “If the buyer is an international company its value will be multiplied by 15, meaning the highest price may close on $1.5 billion.”
POTENTIAL BUYERS
According to Krivoshalko, offers to buy Poroshenko’s chocolate business are most likely to come from three of the top-shelf candy-makers, including Nestle, Mars and Cadbury.
“The second group [of contenders] would be local players, but Ukrainian buyers are out of question and the Russian favorite is the United Confectioners, though I don’t think they have enough funds,” Krivoshalko added.
Nestle and the United Confectioners both refused to comment on the outlook for a Roshen deal.
According to the Candy Industry Top 100 ranking, the top confectionary companies are Mars ($17 billion), Mondelez ($15 billion), Nestle ($12 billion), Ferrero ($11 billion), and Hershey’s ($7 billion).
