June 24, 2015

In response to lower domestic demand, Thailand’s largest meat and animal feed company, Charoen Pokphand Foods Plc (CP Foods), announced it is buying a Russian poultry firm from Netherlands-based company, Agro-Invest Brinky B.V. for $680 million in cash. The deal will be executed through CP Food’s wholly-owned Dutch subsidiary, CPF Foods, which receives a tax exemption from the Dutch government.

With an annual average growth rate of 7.4% over the past ten years, the deal will give CP Foods a foothold in the fast growing Russian animal protein market, which began stepping up imports a year ago after enacting an embargo on Western agricultural goods.

“Russia has high growth potential. This is a good opportunity as the country is short of meat supply and has to import pork and chicken to serve domestic demand,” CP Chief Executive Adirek Sripratak told reporters in Bangkok.

Two thirds of CP’s revenue is now derived from overseas markets as the group has become more aggressive in overseas deals as a means to mitigate a softening in domestic demand. Foreign emerging markets have become of particular interest to the group as it strives to meet its goal of annual growth of 10% – 15% over the next five years.

In 2013 the group ventured into the Russian swine farming sector, and is reportedly in talks to acquire a food processing plant in the country to expand into the manufacturing of value added products. Currently the group has $860 million on hand in cash to fund its purchasing plans.

The initial acquisition of an 80% stake in the Russian poultry operation is expected to be completed by the end of 2015 with the remaining 20% stake to be acquired by the end of 2018. CP Foods is expected to begin booking revenue from the Russia deal in the fourth quarter of this year.