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A likely buyer Roshen Lipetsk plant can become a major confectionery association

As it became known to Kommersant, the holding Slavyanka could become a likely buyer of the Lipetsk confectionery factory of the Roshen concern, owned by Ukrainian President Petro Poroshenko. In the two years since the start of the sale of the factory, the seller more than halved the price of the asset: now, according to market participants, they are asking for about $ 100 million.

The fact that the Slavyanka confectionery association is negotiating the acquisition of JSC Lipetsk Confectionery Factory Roshen (part of Roshen Holding of the President of Ukraine Petro Poroshenko), a source in the industry told Kommersant. Another source close to the seller’s side confirmed that Slavyanka was interested in the asset, but noted that there were other applicants besides it. The chairman of the board of directors of Slavyanka Sergey Gusev did not confirm or refute the holding’s interest in the site. “If negotiations continue, this is a trade secret,” he said, declining to comment further. The administration of the Lipetsk region did not discuss the sale of Roshen. Contact with the factory’s general director Oleg Kazakov failed.

Mr. Poroshenko announced his intention to sell the entire Roshen concern in May 2014, a month before taking office of the President of Ukraine. In January 2016, he said that his stake in Roshen was transferred to an independent blind trust. The managing director of the ICU investment group (one of the advisers on the sale of the corporation) Makar Pasenyuk in April suggested that the sale of the Lipetsk factory could be closed within the next few months.

Slavyanka is one of the largest Russian confectionery holdings. It produces more than 460 products under the brands Belochka, Mishka in the North, Little Miracle, and others. It owns four factories, including the Norwegian Orkla enterprises acquired at the end of 2014 with the brands SladKo, Krupskaya Factory, and Krupskaya Factory. Confit, Volzhanka, Baker. Prior to this transaction, Slavyanka’s turnover was about 13 billion rubles.

Lipetsk confectionary factory was acquired by Roshen in 2001 year. The enterprise produces caramel, iris and biscuits, total - about 60 products. The factory's revenue in 2014 amounted to 2,03 billion rubles, net loss - 407,2 million rubles. According to its own data, in the same period, 91,2 produced thousands of tons of confectionery (2013 thousand tons in 132,7). The total annual confectionery market in Russia exceeds 3 million tons.

A Kommersant source suggests that Slavyanka’s interest in Roshen is related to the geographical location of the factory. Elizaveta Nikitina, Executive Director of the Confectionery Market Research Center, notes that the Central Federal District is the main region in terms of consumption of sweets, mainly due to Moscow and the Moscow Region. “It is also related to the proximity of the production centers of the main confectionery raw material - sugar,” she added.

A Kommersant source in the industry doubts that Roshen will be able to sell at the desired price. "In a relatively prosperous 2014, Orkla's business in Russia was acquired for about $ 50 million," he recalls. "Given the geopolitical problems, the fair value of the Russian site Roshen now hardly exceeds $ 10-15 million." Ms Nikitina believes that in the context of a decrease in confectionery consumption in Russia (by 8,8% in 2015), business expansion through M&A can be justified only if the buyer is provided with a significant discount.

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