Sweeping acquisitions of Russian pollock combines by giant Chinese Group. Full story

October 31, 2006 12:05

Russia’s major Alaska pollock harvesters have fallen prey of sweeping acquisitions by what was described as entities affiliated with one of the world’s leading frozen fish suppliers   Pacific Andes based in Hong Kong, reports Russia’s FINANS Magazine No. 39 (176) dated 9 – 15 October 2006, website www.finansmag.ru.

The latest deals reportedly took place during the past summer when large packs of shares of Nakhodka-based NBAMR plc and Vladivostok-based CJSC Roliz were purchased.

According to RFE sources quoted by the magazine, the value of the transactions amounted to $130 million for the Chinese to take over 70% of the shares of NBAMR from the previous owners CJSC Dalinvestgroup and about 100% of the shares of CJSC Roliz reportedly controlled by Primorye’s Governor Sergey Darkin who has thus pulled out of the fishing business, said the report.

According to the CEO of Vladivostok-based equity firm Vostok-Invest Alexander Ganzhin, the reported price paid by the Chinese is very good and may be put to the credit of the shareholders of the pollock combines. If the figure is correct, this should very positively compare with only $20 million paid for 50% of the shares of NBAMR by the entities of the conspicuous businessman Alexander Abramov back in 2003.

The price has gone up with the improved market for Alaska pollock in 2005–2006, the species making the core of production of the both harvesters.

Pacific Andes appears to be an ideal buyer for the Russian APO producers. Being one of the largest suppliers of APO fillets to the world markets, until 2005 the operation had been in business only for processing and distribution. However three years ago the group set out to implement a new strategy to create a vertically integrated concern to include the entire cycle starting from fishery up to the distribution of finished products. Along these lines, the group established the respective dedicated division which reportedly acquired the Peruvian company Alexandra S.A.C.

Still, according to the magazine, Pacific Andes put forward fishery in the Russian Far East as another major priority with the first acquisition taking place in 2005. More specifically, the Singapore-based subsidiary of Pacific Andes purchased 100% of Chukotka-based Tralflot plc and a controlling pack of shares of Kamchatka-based Okeanrybflot.

It is claimed that in 2005 the Chinese were also negotiating purchase of shares of another major pollock harvester Preobrazhenskaya Trawler Fleet Base plc with headquarters near Vladivostok though no confirmation or denial of the deal has been made.

According to some experts, RFE’s fishery industry is one of the less transparent sectors where it is not customary to own shares directly. In particular, out of 10 major fleets only two or three firms have an understandable ownership structure while the other owners will typically assign shares to third parties.

This may however change as the structure of the Russian assets of Pacific Andes may probably go transparent quite shortly, the report explained.

Most probably Kamchatka-based Okeanrybflot has been selected for the consolidation centre as its shareholders’ General Meeting scheduled for end of October 2006 is supposed to approve seven deals to purchase shares of other companies to the tune of $300 million.

This figure appears fantastic not only for Okeanrybflot (total sales of RUR 2.5 billion in 2005 or ca. $68 million) but for the entire fishery sector of the Russian Far East, the report emphasized. To bridge the gap, the Meeting is also supposed to approve the necessary loan which would be record-high for the regional economy.

The magazine claims that the above deals will enable the Chinese concern to control at least 35% of the catch in the Russian Far East and about 80% of the harvest of Alaska pollock, which has traditionally been making the bulk of the profits.

According to industry sources, the profitability of pollock operations is about 30% as opposed to the general rate of 8–10% at the utmost for the sector as a whole.

In this situation, the foreign capital has gained control of a strategic industry for the first time in the post-Soviet era, the report pointed out.  

Background

Back in 2003 controlling shares of NBAMR were purchased by interests described as closely associated with Alexander Abramov (co-owner of Evraz Group majoring in steel business). However 2 years later the group’s representatives left NBAMR’s Board of Directors with the shares transferred to the businesses affiliated with Primorye’s Governor Sergey Darkin, the report explained.

The event triggered a sort of counter-offensive of Vladivostok-based interests which reportedly succeeded in reversing the expansion of Moscow capital in the region. NBAMR was followed by other cases with the province’s business structures buying back the local largest Bank of Primorye and obtaining short-time management control of the Vostochny Port (Eastern Port).

The advance was linked with growing influence of Governor Darkin who had been elected to lead Primorye (Capital Vladivostok) in 2001.

Prior to the election, Darkin was at the helm of the then middle-sized fishing company ZAO Roliz, but with progress of time the Governor has started to successfully stand up for the interests of what was described as business structures close to the province’s head.

According to the report, the fishery industry is a good example of the developments. In the course of several years share packs of the province’s major combines were consolidated with a potential of creating a vertically integrated holding with revenue of about $300 million. However, the situation has taken a different course.

Governor

At the moment of election Governor Darkin directly owned about 35% of the shares of CJSC Roliz, claimed the report.

Now he is claimed to own 50% of the equity firm CJSC Dalinvestgroup – a major shareholder of NBAMR plc at the moment of sale to the Chinese thus Darkin was presumably getting approximately $55 million out of the alleged value of $130 million of the deal with Pacific Andes.

Besides, in summer 2005 NBAMR plc reportedly paid record high dividends of RUR375 million while Closed JSC Roliz posted record high net profit of RUR 138 million, said the magazine.

Major fishing companies of the Russian Far East

Rating

Company

Subject of RF

Revenue, million RUR

Revenue growth, %

Net profit (loss) in 2005, million RUR

Net profitability in 2005, %

 

 

 

2005

2004

 

 

 

1

NBAMR

Primorye (Capital Vladivostok)

3 508

3 093

13

752

21

2

Okeanrybflot

Kamchatka

2 483

2 170

14

–65

–3

3

Akros

Kamchatka

1 951

1 431

36

191

10

4

Gidrostroy

Sakhalin

1 803

1 442

25

351

19

5

PBTF

Primorye (Capital Vladivostok)

1 526

1 340

14

50

3

6

Turnif

Primorye (Capital Vladivostok)

1 278

1 106

16

–26

–2

7

HC Dalmoreproduct

Primorye (Capital Vladivostok)

1 259

551

129

–794

–63

8

Lenin Fishing Co-op

Kamchatka

1 225

1 057

16

257

21

9

Vostokrybprom

Khabarovsk

944

747

26

71

7

10

Sakhalin Leasing Flot

Sakhalin

918

745

23

6

1

11

Ogni Vostoka Fishing Co-op

Primorye (Capital Vladivostok)

867

794

9

254

29

12

Intraros

Primorye (Capital Vladivostok)

822

751

10

–21

–3

13

Polluks

Koryak Autonomous District

704

688

2

–8

–1

14

Pilenga

Sakhalin

674

415

62

4

1

15

Yuzhmorrybflot

Primorye (Capital Vladivostok)

639

290

120

–17

–3

16

Tikhookeanskaya Rybopromyshlennaya Kompaniya (Pacific Fishing Company)

Magadan

631

601

5

–1

0

17

Vostok-1 Fishing Co-op

Primorye (Capital Vladivostok)

602

687

–12

3

0

18

Kamchatka-Vostok Fishing Co-op

Kamchatka

593

659

–10

–9

–2

19

Luntos

Kamchatka

585

461

27

–47

–8

20

Kamchatimpex

Kamchatka

584

661

–12

7

1

21

Ecarma-Sakhalin

Sakhalin

514

389

32

–34

–7

22

Roliz

Primorye (Capital Vladivostok)

503

383

31

138

27

Source: Russia’s FINANS Magazine No. 39 (176) dated 9 – 15 October 2006

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