Sunflower oil producer to list in Warsaw

Kernel Group of the Ukraine, the world's fifth largest sunflower seed crusher, hopes to raise up to $200m through an initial public offering on the Warsaw Stock Exchange in early November.

Kernel, controlled by 33-year old Ukrainian lawmaker Andrey Verevskiy, has in recent years established itself as a competitor for world giants such as US-based Cargill and Bunge, both of which have large operations in Ukraine, home to the world's second largest sunflower crops after Russia.

Mr Verevskiy hopes the listing "will showcase vast upside" opportunities in Ukrainian agriculture and predicts growth rates will increase in coming years after farm land privatisation is sanctioned by the state.

"Seventy per cent of farmers still have a Soviet-style mentality, don't understand technology and don't, as a result, have high yields. With investments, Ukraine could double its grain harvests to 60 million tonnes in the not too distant future," he added.

ING is advising Kernel Holding SA, a vehicle that owns Mr Verevskiy's integrated bottled oil and agribusiness assets.

Kernel, considered a mid-sized Ukrainian business with an estimated equity value of $500m-$580m, will be the second Ukrainian company to list in Warsaw. Astarta, a Ukrainian sugar producer, raised $32m last year by floating an 18.8 per cent stake.

"The liquidity for a company of our size is expected to be high in Poland," said Mr Verevskiy. "We hope for substantial demand from Polish mutual and pension funds."

The Warsaw exchange has a special programme to entice Ukrainian companies to list in Poland; a Ukrainian company gets the benefit of listing on a European Union market at a much lower cost than doing so in London. Polish pension funds, which have about 140bn zlotys ($55bn) in assets, can invest 40 per cent of their holdings in stocks, providing one of the largest investment pools in the region. The WSE has had 61 IPOs this year, more than the rest of central Europe's bourses combined.

"We have 20 foreign companies on the exchange and more are coming," said Robert Kwiatkowski, responsible for the WSE's Ukrainian programme. "Warsaw is becoming a regional financial centre."

The funds raised by Kernel will be pumped into new plants for processing sun seeds, rapeseeds and soybeans, port facilities, and acquisitions abroad. Kernel controls 35 per cent of Ukraine's bottled sun oil market exporting the rest to Europe, Asia and other markets. The group also controls the largest private grain silo network in Ukraine and ranks as one of the country's leading grain exporters.

Source: By Roman Olearchyk in Kiev and Jan Cienski in Warsaw