Oksana KRYZHANIVSKA works in Alexandrov
& Partners
Ukraine is becoming increasingly attractive for investment coming into the agricultural business. With decent management, Ukrainian agricultural companies can become super-profitable. Taking the above into consideration, 2015 was the year when Ukraine turned over a new leaf in its agricultural life.
1) A considerable number of promising companies were unable to cope with competition and were offered for sale at very attractive prices.
2) Agricultural holding companies were optimizing logistical links among their clusters and, as a result, were selling their distant entities and purchasing those which were located closer to the management hub; that means that some rather attractive assets may be acquired at good prices.
3) Some agricultural holding companies were active in “putting things right” in their production and management systems for the purpose of further growth, increasing the land bank and raising funds.
4) A number of companies (particularly, small-sized and medium-sized ones, with a land bank of up to 10,000 hectares) focused on introducing innovative methods and enhancing efficiency thanks to new technologies.
5) Liquidation procedures were initiated in numerous banks; as a consequence, at the current stage, the pledged assets of agricultural companies may be purchased at prices which are much lower than their real market values.
There are ongoing discussions on the issue regarding lifting a moratorium on the sale of agricultural land. According to opinion polls, a majority of players on the agricultural market are not ready to purchase land even if this market is opened. At the same time, in certain regions, land— owners are already willing to sell and certain agricultural companies (both foreign and Ukrainian) are ready to buy certain amounts of land. Thus, due to the availability of both demand and supply, as well as due to the moratorium, the land market offered new opportunities in 2015 through conclusion of agreements for emphyteusis (land use for agricultural needs). An advantage of such agreement is: so far as private land is concerned, it may be concluded for an indefinite number of years, whereas the right to use land under such an agreement constitutes in itself an article of merchandise and may be, for instance, sold or provided to a creditor as collateral. Thus, an agreement for emphyteusis is a real and efficacious alternative to the land sale and purchase transaction.
