30 Apr 2010 07:00
This announcement is not a prospectus. Investorsshould not subscribe for or purchase any transferable securities referred to in thisannouncement except on the basis of information in the prospectus expected to bepublished by AVANGARDCO INVESTMENTS PUBLIC LIMITED in due course in connection withthe proposed admission of GDRs representing shares of AVANGARDCO INVESTMENTS PUBLICLIMITED to the Official List of the Financial Services Authority and to trading onthe London Stock Exchange plc's regulated market for listed securities (the "Prospectus").Copies of the Prospectus will, following publication, be available from the Company'sregistered office (16-18 Zinas Kanther Street, 3035 Limassol, Cyprus).
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATIONOR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR FROM THE RUSSIAN FEDERATION, UKRAINE,THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION WHERE TODO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION
This communication is for distributiononly to persons who (i) are outside the United Kingdom and qualified to receive itin the relevant jurisdiction, or (ii) have professional experience in matters relatingto investments falling within Article 19(5)of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the"Order"),or (iii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies,unincorporated associations etc") of the Order (all such persons together beingreferred to as "relevant persons"). This communication is directed only at relevant personsand must not be acted on or relied on by persons who are not relevant persons. Anyinvestment or investment activity to which this communication relates is availableonly to relevant persons and will be engaged in only with relevant persons.
This announcement and the information contained herein is only directedat persons in member states of the European Economic Area who are "qualified investors"within the meaning of Article (2)(1)(e) of the Prospectus Directive (Directive 2003/71/EC).
April 30, 2010
AVANGARDCO INVESTMENTS PUBLIC LIMITED
OFFER PRICE SET AT US$15 PER GLOBAL DEPOSITARYRECEIPT (10 GDRs REPRESENTING 1 SHARE)
KYIV,UKRAINE - AVANGARDCO INVESTMENTS PUBLIC LIMITED(the "Company" or "Avangard"), oneof the leading agro-industrial companies in Ukraine, focusing on the production ofshell eggs and egg products, today announces that the offer price for its for itsinitial public offering (the "Offering") has been setat US$15 for each global depositary receipt ("GDR"), with ten GDRs representingan interest in one ordinary share ("Share") of the Company. This implies a marketcapitalisation at pricing of US$937,500,000.
The offering comprises of 1,250,000 new ordinaryshares offered by the Company (as represented by 12,500,000 GDRs), excluding theexercise of the over-allotment option. The Offering represents 20% per cent of theCompany's issued ordinary share capital immediately after the Offering (before theexercise of the over-allotment option and approximately 22.3% per cent in the eventof its exercise in full).
One of the existing shareholders in the Company,Mobco Limited, has granted an over-allotment option to Troika Dialog (UK) Limited,exercisable for a period of up to 30 days from today, to purchase or procure purchasersfor up to 187,500 additional existing ordinary shares in the form of GDRs.
Conditional dealings will commence on the LondonStock Exchange on the 30 April under the ticker symbol AVGR. Admission and commencementof unconditional dealings on the London Stock Exchange are expected to take placeon 6 May 2010.
The Company intends to use the net proceeds ofthe Offering primarily to finance the expansion and diversification of its egg businessthrough capital expenditures. This includes the completion of construction of twonew egg production complexes at Avis and Chornobaivske in Ukraine, whichare each expected to have a design annual capacity of 840 million shell eggs whenfully operational. The Company's expansion plans may also include theexpansionof the processing capacity of the Imperovo egg products plant.
Troika Dialog acted as Global Co-ordinator, LeadManager and Bookrunner for the Offering and NCB Stockbrokers Limited as Co-Lead Manager.
Commenting onthe offering: Nataliya Vasylyuk, Chief Executive Officer of Avangard, said:
"We are delighted by the investor support andinterest we have had during the IPO despite the volatile market conditions. Today'sannouncement represents the start of a new and exciting stage in the Company's development.Our leading position in the Ukrainian egg market, along with our strong financialtrack record and vertically integrated business model, gives us confidence for thefuture. We look forward to keeping our new shareholders updated on our progress inimplementing our growth strategy."
Commenting onthe offering: Oleg Bakhmatyuk, controlling shareholder and Chairman of the Board of directors of Avangard,said:
"Avangard is a firstclass company with excellent prospects and I am delighted that the offering has hada successful outcome. The track record of the management team to date has been exceptionaland I am looking forward to continuing to work with them, with the support of ournew shareholders."
- Ends -
For further information please contact:
| Financial Dynamics London Ben Foster Marc Cohen
+44 20 7831 3113
| Financial Dynamics Moscow Leonid Solovyev Oleg Leonov
+7 495 795 06 23
|
Initial public offering statistics
| Offer price per ordinary share | US$150 |
| Offer price per GDR | US$15 |
| Number of ordinary shares in issued share capital,after giving effect to the total Offering (assuming the exercise of the over-allotmentoption) | 6,437,500 |
| Market capitalisation at pricing | US$937,500,000
|
| Number of GDRs sold in the Offering (excludingover allotment option) | 12,500,000 |
| Gross proceeds of the Offering receivable by thecompany (excluding over-allotment option) | US$187,500,000 |
| Number of GDRs subject to over-allotment option | 1,875,000 |
Notes to Editors
Information of Avangard
The Company is a holding company for a group (the"Group") that is one of the leading agro-industrial companies in Ukraine, focusingon the production of shell eggs and egg products. The Company is the number one producerof shell eggs and dry egg products in Ukraine with a market share of approximately23% (including 39% of industrially produced shell eggs) and 52% respectively in 2009.As of 31 December 2009, Avangard's flock consists of approximately 16,121 thousandbirds. Avangard's production facilities are located across 14 regions in Ukraineand also in the Autonomous Republic of Crimea. In 2009 Avangard exported its shelleggs and egg products to 16 countries mainly in the Middle East and Asia.
Investment highlights
· Number one positionin the large and growing Ukrainian market of shell eggs and dry egg products.
· Vertical integrationensuring reduced costs and enhanced quality control.
· Highly advancedtechnology.
· High biosecuritystandards.
· Experienced managementteam.
· Strong financialperformance - secured and effectively allocated financial resources to meet the needof expanded business.
Operations
Avangard operates verticallyintegrated shell egg production facilities comprising 19 farms for laying hens. Thesefarms are serviced by three breeder farms, nine farms for growing young laying hens,six fodder mills and three long-term egg storage facilities. This level of verticalintegration allows Avangard to reduce production costs, better coordinate and controlthe various stages of production and improve the overall quality of its products.
Avangard also operates facilities for the productionof egg products at its Imperovo plant located in the Ivano-Frankivsk region of Ukraine,which Management believes to be one of the most technologically advanced egg processingfacilities in the CIS. Imperovo has a design processing capacity of 3 million shelleggs per day. Avangard intends to gradually increase Imperovo'sprocessing capacity to 10 million shell eggs per day. Currently Avangard producesonly dry egg products.
Avangard's shell eggs and egg products are eitherexported or sold wholesale to customers.
Competitive strengths
Leading market position in a large and growingmarket for shell eggs and egg products
Avangard is one of the leading producers of shelleggs and egg products in Ukraine, which in 2009 had a marketshare of approximately 23% of all shell eggs (including39% of industrially produced shell eggs)and approximately 52% of all dry egg products produced in Ukraine. The annual industrialproduction market for shell eggs and egg products in Ukraine is expected to continueto grow in the short to medium term, as a result of declining alternative sourcesof supply (such as household production) and, to a lesser degree, potential furtherincreases in consumer demand. Management believes that Avangard's established marketposition and reputation for quality enhances its bargaining position with customersand its size helps it to realise production and marketing economies of scale. Managementbelieves that Avangard is in a strong position to strengthen its market positiondue to an expected decline of small industrial and household producers and enjoysa competitive advantage over potential new entrants to the market due to the significanttime and investment that would be required for a new entrant to develop verticalintegration on a similar scale.
Countrywidecoverage and diversified sales structure
Avangard's production facilities are locatedin 14 regions of Ukraine and also in the Autonomous Republic of Crimea. Avangardbelieves that its countrywide coverage gives it a competitive advantage and enablesit to achieve better pricing and margins. Avangard sells its products through a varietyof channels, including exports and sales to domestic wholesalers, of which majorsupermarket chains have become an increasingly important distribution channel. Avangard'sdiversified sales structure enables it to manage costs and increase operationalefficiency.
Potential for further export growth
Avangard is well positioned to sell increasingamounts of both shell eggs and egg products into export markets. In 2009, Avangardexported its shell eggs and egg products to 16 countries. Avangardis liaising with Ukrainian state authorities in order for it to be able to sell itsegg products into the EU. Management believes that Avangardmay benefit from lower production costs relative to EU producers. The location ofsome of Avangard's facilities, including the Imperovo egg processing plant in westernUkraine, means that it is geographically well positioned to export into the EU andthat transportation costs would be less than for some of its competitors.
Vertical integration reduces costs and enhancesquality control
Other than breeder flock, Avangard owns and operateseach of the key stages of egg production processes, from the production of hatchingeggs (from which laying flock is hatched) to the production of shell eggs. To supportits egg production operations, in 2009 Avangard internally produced 75% of its animalfeed (sourcing the remainder of its animal feed requirements and all of the feedgrains for the production of the animal feed from third parties). Management believesthat vertical integration reduces Avangard's dependence on suppliers and this isparticularly important in developing markets, such as Ukraine, to avoid supply interruptionand price volatility. Vertical integration also creates synergies in a number ofother areas, as well as stronger control over costs. In addition, vertical integrationalso allows Avangard to maintain strict biosecurity and to control the quality ofits inputs and the resulting quality and consistency of its products through to thepoint of sale.
Moderntechnology
Avangard employs advanced technologies at itsvarious production facilities, including in relation to its breeder farms, farmsfor growing young laying hens, farms for laying hens and egg processing facilities.Avangard's production process is largely automated, which ensures and promotes consistentlyhigh-quality products in a cost-effective manner. Avangard sources the equipmentfor its egg production facilities both domestically and from leading European suppliersand the benefits of its modern equipment and advanced technologies are reflectedin Avangard's favourable performance indicators, production costs and the high qualityof Avangard's shell eggs and egg products.
High biosecurity standards
Avangard employs strict biosecurity measures throughoutits entire production process, from breeding to laying, as well as its animal feedproduction facilities, in order to minimise the risk of contamination and diseaseat its egg production facilities. These measures include, amongst others, keepingchickens within indoor production facilities, employing multi-site farming, disinfectingvehicles entering production areas and regularly monitoring the health of chickensand employees. Avangard's biosecurity system complies with Ukrainian legislationand is in line with international best practices.
Strategy
Avangard's overall objective is to expand itsposition as one of the leading agro-industrial companies in Ukraine, while strengthening its position as the leading Ukrainian egg production and egg processingcompany and exporter of shell eggs and egg products. Thekey elements of its strategy include:
· Increasing marketshare in Ukraine.
· Expanding eggproduction capacity.
· Expanding exportof eggs end egg products
· Continuouslyfocusing on the efficiency of production process
· Continuing thedevelopment of its customer base.
· Constructingbiogas production facilities.
· Enhancing thevalue of the regional brands and introducing a national brand for its shell eggs.
· Expanding intoneighbouring countries.
2009 Financial results
Avangard has delivered a strong financial performancein recent years despite the challenging economic conditions. TheCompany generated revenues of USD $319.855 million (2008: USD $302.292 million),EBITDA of USD $152.092 million (2008: USD $113.738 million).
In 2009 the Company decreased its Cost of Goods("COG") by 5%, from 77% to 69% of sales revenue, as compared to 2008.
Avangard has a very strong balance sheet withnet debt of USD $102.571 million, equating to 12% of total assets and 0.7x EBITDAin 2009.
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Troika Dialog are acting exclusively for the Companyand no one else in connection with the Offering and will not regard any other person(whether or not a recipient of this announcement) as their respective clients andwill not be responsible to anyone other than the Company for providing the protectionsafforded to clients of Troika Dialog nor for giving advice in relation to the Offering,the contents of this announcement or any transaction or arrangement referred to herein.
This announcement does not contain or constitutean offer of, or the solicitation of an offer to buy or subscribe for, securitiesto any person in the United Kingdom or any other European Economic Area state, Australia,Canada, Japan, Ukraine, the Russian Federation, the United States or in any otherjurisdiction. The securities referred to herein may not be offered or sold in theUnited States absent registration under the US Securities Act of 1933, as amended(the "Securities Act") or another exemption from, or in a transaction not subjectto, the registration requirements of the Securities Act. Subject to certain exceptions,the securities referred to herein may not be offered or sold in the United Kingdomor any other European Economic Area state, Australia, Canada, Japan, Ukraine, theRussian Federation, the United States or to, or for the account or benefit of, anynational, resident or citizen of the United Kingdom or any other European EconomicArea state, Australia, Canada, Japan, Ukraine, the Russian Federation or the UnitedStates. The offer and sale of the securities referred to herein has not been andwill not be registered under the Securities Act or under the applicable securitieslaws of Australia, Canada, Japan, Ukraine or the Russian Federation. There willbe no public offer of the securities in the United States.
Neither the Financial Services Authority nor anyother listing authority or exchange has, at the date of the announcement, approvedthe proposed listing of GDRs in the Company.
Informationin this announcement or any of the documents relating to the Global Offering cannotbe relied upon as a guide to future performance. The price and value of securities may go up as well asdown. Persons needing advice should contact a professional adviser.
This announcement may include statements thatare, or may be deemed to be, "forward-looking statements". These forward lookingstatements can be identified by the use of forward looking terminology, includingthe terms "believes", "estimates", "plans", "projects", "anticipates","expects", "intends", "may", "will", or "should" or, in each case, theirnegative or other variations or comparable terminology. These forward looking statementsinclude matters that are not historical facts and include statements regarding theCompany's intentions, beliefs or current expectations concerning, among other things,the Company's results of operations, financial condition, liquidity, prospects,growth, strategies and the outlook on the industry.
By their nature, forward looking statements involverisk and uncertainty because they relate to future events and circumstances. A numberof factors could cause actual results and developments to differ materially fromthose expressed or implied by the forward looking statements including, without limitation,the factors to be described in the risk factors section of the Prospectus, and thefactors to be described in the financial review and prospects section of the Prospectuswhen it is published.
Forward looking statements may and often do differmaterially from actual results. Any forward looking statements in this announcementreflect the Company's view with respect to future events as at the date of thisannouncement and are subject to risks relating to future events and other risks,uncertainties and assumptions relating to the Company's operations, results of operations,growth strategy and liquidity. Save as required by law or by the Listing Rules ofthe Financial Services Authority, the Company undertakes no obligation publicly torelease the results of any revisions to any forward looking statements in this announcementthat may occur due to any change in its expectations or to reflect events or circumstancesafter the date of this announcement.