UKRProduct Acquires LLC Zhyvyi Kvass & Arsenie VSKY Trademark

Posted: 6th April 2012 10:23

Ukrproduct Group Limited ("Ukrproduct" or "the Company" or, together with its subsidiaries, "the Group") (AIM: UKR) is one of the leading producers and distributors of branded dairy products in Ukraine.

The Company announces that it has acquired the "Arsenievsky" branded kvass business. The acquisition has been completed through purchase of the entire issued share capital of LLC Zhyvyi Kvass ("Zhyvyi Kvass"), a producer of "Arsenievsky" branded kvass, and, by way of a separate agreement, the purchase of the "Arsenievsky" trademark for an aggregate consideration of GBP 295 k payable in cash in quarterly instalments out of current facilities.

Ukrproduct has been the exclusive distributor of "Arsenievsky" branded kvass, traditional fermented beverage made from rye, black bread or barley, since September 2010. This has proved to be successful and encouraging growth prospects are foreseen. The existing distribution agreement was due for renewal at the end of 2012.

The Company therefore considers this to be an important strategic acquisition, integrating into Ukrproduct the kvass operations, production facilities, trademark and marketing which will achieve greater efficiency and ensure security of supply and branding.

The Kvass production facility is located in Zhytomyr and is adjacent to the Group's facilities for the production of processed cheese. This makes it efficient to run joint businesses going forward. Most of the production equipment of Zhyvyi Kvass is new and was commissioned into full operation in July 2011 to EU standards. This has provided for a substantial increase in capacity to satisfy the growing demand for kvass that management believes to be available in the Ukraine and abroad. There are plans to actively develop its sales coverage and the well recognized trademark, as sales in 2011 were generated mainly in three central regions of Ukraine and limited by the lower production capacity which existed before the upgrade was put in place.

The aggregate net asset value of Zhyvyi Kvass at completion, including the "Arsenievsky" trademark (at cost), is GBP 286 k and net debt at 31 December 2011 was GBP 1.77 m.  In the year ended 31 December 2011, Zhyvyi Kvass recorded revenue of GBP 1.35 m, operating profit of GBP 49k and a loss before taxation of GBP 76 k after one-off spending on market development. The Company believes that prospects for the kvass business in 2012 are favourable.

Alexander Slipchuk and Sergey Evlanchik, directors of Ukrproduct, are each beneficial owners of 42.5% of the issued share capital of Zhyvyi Kvass and Sergey Evlanchik is the beneficial owner of 47.5% of the issued share capital of the vendor of the trademark. The directors of Ukrproduct who are not involved in the transaction as related parties consider, having consulted with WH Ireland Limited, Ukrproduct's nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.


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