Poroshenko did not choose the best time to win the elections – Roshen will not give him more than a billion dollars. However, there are options.
1,5 months ago we wrote the following articles. During this time, it has not lost its relevance. How much will Poroshenko be able to get for his main business – Roshen company?
In an interview to the German newspaper Bild, Petro Poroshenko stated that in case of victory at the elections, he would sell Roshen corporation. Taking into account that within two months of the elections, 24.9% of the voters are ready to vote for him, and only 8.2% would give their votes to Yulia Timoshenko, the chances that Roshes would be sold are quite high. UPD on May 26th, 2014: After the announcement of the results of the exit polls, according to which Poroshenko is winning in the first round, the future President stated that he had already given orders to find a buyer for his main asset – the confectionery company Roshen.
The biggest confectionary company of Ukraine, Roshen corporation, is well-known outside of the country. And not because of the factories across the border, or because of the fact that the company’s produce is being supplied to markets in 35 countries. Roshen has stably been listed among the biggest confectionary companies in the world. According to the British specialised magazine Candy Industry, Roshen is the 20th biggest corporation in the world in terms of revenue, having gained about $1bn in 2013. A year ago they did better: Roshen’s revenue was $1,3bn, it took 18th place.
The main reason for the fall of revenue is the loss of the Russian market because of the trade wars. In one of his interviews, the general director of the company Vyacheslav Moskalevskiy evaluated the supplies to the northern neighbour at $200mn.
The annex of Crimea and the Kremlin’s rhetoric allow us to suppose the Poroshenko has lost not only the Russian market, but also the confectionary plant in this country, for a long time. In March of 2014 the Russian police arrested the accounts of the Lipetsk confectionary. The formal reason was that Roshen is suspected of producing counterfeit product, the informal one is pressure on one of the Euromaidan leaders and favourite of the presidential race. Production in Lipetsk has been stopped.
Last year Roshen was able to partially compensate for the Russian losses at the internal market. Poroshenko got lucky with the consumer boycott of Party of Regions businesses. Roshen’s main competitors – Konti and AVK – belong to “regionals.” This year there will be no such compensation.
How much could Roshen be worth? The corporation is not publicly, it has no consolidated financial accountability, its debts are unknown, the fate of the Russian assets is questionable, and a political and economical crisis is underway in Ukraine. But even with such details, it is possible to approximately evaluate the cost of Roshen.
The simplest and least sensitive to the above mentioned difficulties way to evaluate the company is to compare it to similar public corporations. Thus, the average coefficient “stocks price/revenue” for confectioners from Turkey and Poland constitutes between 1,3 and 1,9 now. This means that if the risks of doing business in Ukraine were the same as in Poland or Turkey, then it is most likely that Roshen would cost between $1,3 and $1,9bn (revenue multiplied by the coefficient). Last year Boris Kolesnikov put up his confectionary company Konti for sale for $1bn, which accorded to a coefficient of 2,4, however there were no buyers.
Today Ukraine is far from being Poland or Turkey. “Now the country risks are very high. The investment climate was being destroyed for four years, the economy is in recession, the relations with Russia are, to put it mildly, a cause for caution,” says CEO of the investment company Concorde Capital Igor Mazepa. “Therefore if the deal started now, the potential buyers would begin with a discount of 20-30%.” Another Ukrainian investment banker evaluated the discount at a minimum of 50%. “While Ukraine has a presence in the emergency CNN reports within the context of Russian tanks, it is senseless to sell anything.”
If Poroshenko were to sell Roshen immediately after the elections, it is unlikely that he would get more than a billion dollars, and the discount would constitute between $250 and $900 million. It is most likely he will not have to pay such a high price for his presidency. Time is on Poroshenko’s side. “Let’s wait until the beginning of the deal, see what the situation in the economy and politics is like,” says ICU investment company partner Makar Paseniuk. “It can be supposed that the coefficient for sales at a more stable time would be comparable to the numbers of world leaders – Nestle and Kraft Foods (now the coefficients are 2.33 and 1.82 respectively – editors). “Such big deals last for months, or even a year,” says Mazepa. “An it well may be that next year stocks from Ukraine would be sold with a premium, not a discount.”
Aside from coefficients and market conjuncture there are more important factors. A year ago, in his Forbes interview, Petro Poroshenko said: “The motherland and Roshen are not for sale.” Whether the presidential seat will force him to part with his beloved asset ‘for real,’ or whether Roshen will be given ‘for safekeeping’ to his faithful companions is an open question.
Boris Davydenko, Ivan Zaycev.
Translated by Mariya Shcherbinina