Kernel to buy control of Allseeds for USD 42 mln

Kernel Holding (WSE: KER PW) announced yesterday that this week it concluded a call option agreement that gives it the right to acquire a controlling stake in Allseeds for a cash consideration of USD 42 mln. The transaction requires the approval of Ukraine’s Antimonopoly Committee and must still pass Kernel’s due diligence, currently in progress. Allseeds is Ukraine’s third largest producer of crude sunflower oil. Allseeds Group owns two refineries in Ukraine, with a total output of 565 ths mt per year. It also controls a transshipment and export terminal with a capacity of over 1 mln mt in Mykolaiv and 16 storage facilities with a capacity of 600 ths mt.  Andriy Gostik: With this deal, Kernel would acquire its largest Ukrainian competitor on the vegetable oil market, and the joint market share of the two companies in bulk oil exports would comprise as much as 24%, yielding only to Cargill. The combined company would also be the largest sunflower oil producer in Ukraine. While the news creates positive sentiment toward the stock, we expect a cautious reaction from the market, as the deal is not finalized yet. Another worrying signal is the sum of the consideration, which seems to be significantly lower than a reasonable range and might suggest that the acquisition involves taking up some unspecified liabilities of the target company.