Poultry producer Drosed steps away from awaited sale to strategic investor
After a prolonged courtship, the country's No. 1 poultry producer, Drosed, is likely to be wed to a strategic investor as early as next week.
"The truth is that negotiations are very far advanced with a strategic investor," said Ryszard Pietkiewicz, president of Drosed.
Because he is not involved in that final process of negotations Drosed's supervisory board is carrying on the discussions Pietkiewicz refused to drop names of potential investors. "I can't say anything."
While mouths are tight at Drosed, the word on the street is that the lucky beau is likely to be Dutch poultry producer CHV. With a strong retail distribution network in Western Europe, CHV is anxious to get hold of Poland's clear market leader.
With a 20% market share, Drosed is the most coveted of domestic poultry producers. In the past four years it has risen from the No. 3 position to be the unchallenged market leader. The company's nearest rival is Szczecin-based Drobimex-Heintz, which commands an 8% market share.
"Drosed is the best company on the market and this market is still growing," said Bogna Sikorska, an analyst at CDM Pekao Securities.
Drosed reported revenue of zl. 306 million ($87.43 million) in 1999, with a net profit of zl. 6 million ($1.71 million), double the 1998 result, Sikorska said.
The hookup with an international investor has been anticipated since last year. When a deal looked near completion last autumn, Drosed shares shot up zl. 20 to hit around zl. 60, 50% from the summertime level of zl. 40. When the deal looked as if it were on the verge of completion, investors moved out of the stock. Drosed closed last Thursday at zl. 54. "The entrance of an investor has been very much delayed," Sikorska said.
The sticking point is price, Sikorska said. The haggling range appears to be between zl. 60-zl. 70 per share. With total outstanding shares of 1.98 million, the deal values Drosed at zl. 118.8 million-138.8 million ($28.8 million-$34 million).
The number of shareholders that a potential buyer has to deal with at Drosed might explain the length of the courtship. While the largest single investor is Big Bank Gdanski (BIG BG), which holds 25%, analysts last week said that the real difficulty is convincing some of the other seven shareholders who each hold more than a 5% stake in the company.
"There are a lot of sellers," Sikorska said. "It's a problem to come to an agreement when there are so many people."
While BIG BG is expected to cut a deal easily, Sikorska said four individual investors who hold just under 50% of the shares in the company are probably holding out for nearly zl. 70. "I think they will insist on closer to zl. 70," she said. "But I think we will have the end pretty soon."
The Drosed buyout comes at a time when the poultry market in Poland is ripe for consolidation. With about 300 slaughterhouses operating on the market and with some significant players like Drobimex-Heintz losing out on market share and teetering on the edge of bankruptcy, the next three years are expected to bring big changes on the market, market watchers said.
The privatization of Szczecin-based Drobimex-Heintz, of which the Treasury Ministry holds 75%, has been anticipated by the poultry market for the past two years. Once the market leader, it has now slid to the No. 2 slot and last year's losses are estimated to have reached zl. 16 million ($4.57 million), double the year before, Sikorska said.
"Drobimex used to be the largest company on this market," Sikorska said. "Since 1995 nothing has been done there and the company is losing market share."
