Croatia’s agricultural jewels that are now part of Fortenova Group are on sale. The transaction involves four companies all involved in agricultural sector: Belje, Pik Vinkovci, Vupik, and Vinka. They are not generating enough of additional value for the current structure. We looked at their financials and potential valuation of the transaction. There are three bidders in the sale process and according to the media they have all shown strong interest and high multiples in the takeover bids. They are all strategic players and expect high synergies with the offered businesses. We just have to wait and see who will take-over and what is agricultural companies’ future under new owners.

Fortenova Group is set to divest its agricultural business, a significant move aimed at reducing its substantial debt. Fortenova is expected to sell four companies under its agricultural segment: Belje, Pik Vinkovci, Vupik, and Vinka. Notably, Pik Vrbovac is not part of this sale. They are not generating enough of additional value for the current structure. The sale is should allow them to alleviate financial pressures and streamline their operations.

Key Players in the Bidding Process

Several interested parties are vying for the acquisition of Fortenova’s agricultural assets. The prominent contenders include:

1. Podravka: A listed company committed to informing the public about the progress of the transaction with a market capitalization of over EUR 1bn.
2. Hungarian Meszaros Group: Although it is not their core business, the group wants to become the largest food producer in Hungary (among other business segments).
3. Slavonia Consortium: Composed of Žito and Osatina – two companies are bidding together and could potentially list on the stock exchange if they secure the deal. The consortium owns over EUR 300m in assets combined.

Strategic Importance of the Agricultural Segment

The agricultural segment owned by 4 companies together represents a vital part of Croatia’s agricultural sector’s production. When looking at market share it accounts for:

• 35% of pig feed

• 34% of animal feed

• 20% of beef production

• 17% of vegetables

• 10% of wine and milk

However, the land used for these agricultural activities is not part of the sale, as it is state-owned and managed through long-term concessions, leases, and early contracts.

Financial Speculations and Market Dynamics

Looking at the average EBITDA multiple of the agriculture business transactions in the prior year from MergerMarket, which amounts to 14.6x, we arrived at the total value of the business of EUR 500m. Taking into account selected obligations and the cash position of target companies, we arrived at a net debt position of EUR 273m, implying the value of equity of EUR 228m. Finally, Fortenova Group, being a private entity, is not compelled to accept the highest offer and can prioritize other factors such as trust and regional preference in their decision-making process.

Source: MergerMarket, InterCapital Research

Belje, PIK Vinkovci, VUPIK, and Vinka are Croatian agricultural companies, each with distinct focuses within the food and beverage sector. Belje specializes in a wide range of products including dairy, meat, grains, and wine production. PIK Vinkovci is involved in crop production, livestock breeding, and food processing, while VUPIK centers its operations on crop and livestock production, alongside viticulture and food processing. Below, we decided to present you with FY 2023 key financials for the companies that are spoken of from Fortenova’s agriculture segment (without Vinka). Looking at FY 2023 data, the companies together achieved c. EUR 13.3m of bottom line and EBITDA of EUR 35.2m. Belje noted a net loss of EUR 0.2m, while in the previous year the company achieved net profit of almost EUR 15m. Belje’s assets amounted to EUR 327m.

Key financials [Belje, Vupik & Pik Vinkovci, FY 2022, EURm]

Source: FINA, InterCapital Research

Overall, taking into account average EBITDA multiple from the agriculture business transaction in 2023, we arrived at the business value of EUR 500m, implying the equity value of EUR 228 after subtracting net debt positions. The decision to finalize the buyer has a deadline of 1 July, 2024. The decision will significantly impact the regional agricultural landscape, with local stakeholders expressing a preference for maintaining local ownership. The outcome will influence Croatia’s agricultural sector’s future.