Transcript Black Earth Farming Ltd.

Equity Capital Markets
Black Earth Farming IPO
December 2007
PRIVATE AND CONFIDENTIAL
© Nomura International plc
Black Earth Farming Ltd. – a landmark transaction
Black Earth Farming Ltd. 19 December 2007
1st
Initial Public Offering
US$300 million
Key Terms
Largest ever European IPO in the
agricultural sector
Key Highlights
Size
US$300mn

Target price achieved, despite sustained market volatility
Pricing Date
19 December 2007

Offering several times oversubscribed - upsize option exercised on
pricing
Listing
First North Stockholm

Market capitalisation at IPO of approx. US$911mn (ex-greenshoe)
Price range
SEK 43 - 53 per SDR

Placed with high quality EM, specialist agricultural, pension and
generalist funds
Issue price
SEK 50 per SDR

Nomura generated total demand in excess of the offer size
Primary / secondary
100% primary

Nomura responsible for generating six out of the ten largest institutional
allocations
Offering structure
 International institutional offering
 Public retail offering in Sweden and
Norway
Market cap at IPO
Approx. US$911mn (ex-greenshoe)
“We are proud to see the overwhelming trust in Black
Earth Farming...It is a confirmation that investors share
our belief and excitement for the industry and Black Earth
Farming’s opportunities.”
Upsize option
up to 5% of the offering size (exercised)
Michel Orlov, founder and President of Black Earth
Faming
Greenshoe option
up to 15% of the offering size (exercised)
Joint Lead Manager
Nomura International plc
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Nomura: capturing strong investor sentiment in the sector...
“In Chicago wheat and rice prices for delivery in March 2008 have jumped to an all-time
record, soya bean prices are at a 34-year high and corn prices at a 11-year peak.”
FT, December 2007
“South Asia hit by food shortages”
BBC, January 2008
Demand drivers
Constrained supply
 Ordinary demand
 Finite supply of land
 Extraordinary demand – changing
diets
 Increased use of livestock
 Competing use of land
 Biofuel demand
 Sustainable demand
 Robust pricing
 Strong desire for exposure
Few major players
160.
150.
Wheat
price
Novelty of sector
140.
130.
+51%
120.
110.
 Early stage of development
100.
90.
80.
Feb 07
Apr 07
Jun 07
Aug 07
Wheat Price
Oct 07
Dec 07
 Growing interest from investors
 Fragmented industry:

Few corporate entities of scale

“First mover” advantages for credible players
Soft commodities: strong investor appetite with limited opportunities for exposure
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%
...to ensure best execution despite challenging markets
120
115
“As the Russian market has grown, the deal pipeline has become more
crowded, with some companies struggling to gain attention against other
deals in the market at the same time. [...]”
New Russian Generation
110
IPO cancelled
Wary investors desert London IPOs
“Volume plummets by 75% on LSE & AiM [...]
international investors continue to look for
high-return oppurtunities”
105
Teorema Holding
Russian Timber Group
IPO cancelled
IPO cancelled
100
95
May 2007
June 2007
GV Gold IPO cancelled
July 2007
August 2007
Sep 2007
Oct 2007
RESO-Garantia
OGK-6
IPO cancelled
CB cancelled
Nov 2007
Dec 2007
Black Earth Farming
IPO completed
90
Investor confidence slumps in October
“Confidence among institutional investors
slumped for the second month in a row in
October”
85
May 07
Jun 07
Jul 07
Aug 07
MSCI The World Index
Sep 07
MSCI Europe
Oct 07
Russia RTS
Nov 07
Dec 07
Jan 08
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Nomura’s analyst embarked on an intensive global investor
education campaign...
Richard Ferguson
Attractive &
compelling sector
Soft Commodities Research
Geographic
location
& low cost metrics
Nomura marketing campaign
Impressive
management
team with
track record
Proven
turnaround
ability
Professional Services
Substantial
agricultural
landbank
 Of the 1,000 accounts Nomura initially
contacted, over 200 expressed strong
interest
 Nomura selected over 100 of these investors
based on quality, interest and likely order size
and embarked on an extensive marketing
campaign across Asia, UK and Europe
Russian
government
policy
backing
Last Russian
“privatisation”
Attractive &
compelling sector
...to deliver the Company’s unique equity story to investors
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Nomura delivered high quality allocations...
Selection of Nomura generated orders
AIA/Investment Advisory
Regional breakdown of Nomura marketing activity
Continental
Europe
35%
Regional breakdown of orders generated by Nomura
Continental
Europe
50%
UK
26%
Asia / RoW
24%
Asia / RoW
39%
Source: Nomura, by number of investors contacted
UK
26%
Sizeable orders from
Continental Europe
impacted the regional
distribution of orders
Source: Nomura, by size of orders
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...and assisted in the Company’s strong aftermarket
performance
+28%
20
64
60
SEK
58
Nomura has traded over US$80
million of BEF stock to date,
including several blocks of over
US$10m placed with high-quality
investors
56
18
16
14
12
10
54
8
52
6
50
4
48
2
million SDRs traded
62
0
46
02 Jan
03 Jan
04 Jan
07 Jan
08 Jan
09 Jan
10 Jan
11 Jan
14 Jan
Volume - (in Millions)
Black Earth Farming Ltd.
MSCI EM Europe
FDSAGG Europe x Eurozone / Agricultural Commodities/Milling -IND
Source: Factset, since IPO
Nomura is committed to supporting its clients in the aftermarket
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High profile and complementary coverage
Black Earth digs deep
The SKr1.68bn (US$255m) IPO by agricultural group Black Earth Farming was
completed successfully in late December. The all-primary deal was multiple
times covered and attracted demand from investors across a wide range of
countries. Emerging markets accounts and specialist agricultural funds
dominated the book.
The company sold 33.6m Swedish depositary receipts (SDR), representing
28.1% of the enlarged share capital, and there is a greenshoe of a further
4.8m SDRs. The price was set at SKr50, in the top half of the SKr43–SKr53.
The company became the largest listed group on OMX's First North exchange
on December 28.
The shares opened up 2% at SKr51 and rose to a high of SKr51.50 before
falling back to close at SKr50.
Trading volumes were fairly low with only 4.9m SDRs changing hands,
representing 14.5% of the deal. The company is registered in Jersey, but is
owned by two Swedish investment groups Kinnevik and Vostok Nafta. It
acquires and cultivates farmland in south-west Russia, which is known for its
very fertile soil and is commonly known as the Black Earth region.
Russian IPO are set for a successful 2008...
The last of the year’s deals to price was Black Earth Farming, a land
owning company incorporated in Jersey and operating in Russia.
The company appointed Öhman Fondkommission as bookrunner and
Nomura as joint lead manager for the sale of Swedish Depository
Receipts (SDRs). At Skr50, the SDRs were priced at the upper end of
the Skr43-Skr53 range.
The offer represents new shares in the form of 33.6m SDRs or 28.1%
of the company’s outstanding share capital post-IPO.
Trading on the Stockholm stock exchange started on December 28
and the shares reached Skr51.50 in trading yesterday.
Black Earth’s market capitalisation after the offer reached $911m.
There is an over-allotment option of 4.8m SDRs, or 15% of the base
deal size.
4 January 2008
5 January 2008
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