Žito sells a quarter of Čepin Oil Mill to a Cypriot company

The Osijek agricultural and food conglomerate Žito has concluded the sale of nearly a quarter of its stake in the Čepin Oil Mill (TUČ) to a Cypriot investor about whom there is little publicly available information. In a statement on the Zagreb Stock Exchange, Žito revealed on Wednesday that the transaction for the sale of 23 percent of shares in the Čepin Oil Mill has been completed, with Equinor Limited, a company registered in the Cypriot capital Nicosia, listed as the buyer.

The company owned by Marko Pipunić stated that Equinor – which shares the same name as the Norwegian oil company – acquired just under 882,000 shares in TUČ. The purchase price has not been disclosed. This transaction was first revealed in the prospectus accompanying Žito’s stock market debut last summer. It is worth noting that in the most valuable public offering of shares in the domestic stock market’s history, Žito raised over 130 million euros in capital from 4,200 investors.

A multitude of unknowns

The prospectus states that Žito signed a contract in mid-May for the sale of 23 percent of TUČ shares with a ‘strategic investor from one of the regions of the southern and eastern Mediterranean operating in the food industry.’ – The buyer of TUČ d.d. shares is a renowned producer and distributor of food products with decades of experience in the industry. It holds a leading position in the local market and, thanks to a wide product portfolio, is present in almost every household. In addition to a strong domestic position, it has developed a regional and international presence, particularly in the Mediterranean markets and the wider region, where it operates as a reliable supplier of food raw materials – states the prospectus.

However, the little publicly available information that can be found indicates that Equinor is far from a renowned producer with decades of experience. Data from the Cypriot company register shows that Equinor was registered on September 1 of this year, with Isalos Services listed as the director. This is a Cypriot corporate services provider associated with the law firm Athos Demetriou. Isalos frequently appears as the director of numerous companies registered in Cyprus. The leader has requested a comment from Žito, which had not arrived by the time of publication, and we will publish it later when it comes.

The summer prospectus also stated that upon fulfilling the conditions and executing the transaction, Žito would retain a majority ownership stake of 75.69 percent of shares in TUČ. However, there is a possibility that Equinor, based on contractual rights (an option for additional purchase), could increase its ownership stake to a total of 50 percent of the shares in the Oil Mill. However, the contract stipulates that Žito also has the right to repurchase previously transferred shares if certain conditions are met.

Repurchase option

Žito believes that this transaction has significant strategic value for the Group. – The financial income generated from the sale of shares further strengthens the Group’s capital position and will be directed towards further development and investments in core activities. At the same time, the buyer holds a significant market share in oil sales in its home market, and the entry of a renowned partner from the industry enables planned long-term cooperation in the production and distribution of oilseeds, from which significant benefits are expected. Through this strategic partnership, new market opportunities for the placement of products from the Čepin Oil Mill will be opened, strengthening the integration of the supply chain within the Group and enabling the transfer of specific knowledge and technologies in the oilseed segment – states the prospectus.

The Čepin Oil Mill is the largest Croatian processor of oilseeds with a processing capacity of 150,000 tons of oilseeds and a production capacity of about 32 million liters of edible oil annually. The raw material basis for oil production consists of oilseeds from Žito’s agricultural areas and its cooperatives, while the remaining quantities are sourced from the market. Revenues from the industry segment – which, along with the Oil Mill, also includes the production of animal feed, energy, and the meat industry – account for the largest share of the Group’s total revenues, about one-third. Of this, the largest share of revenues in the industry segment comes from oil production.

It is worth noting that Žito became the owner of the Čepin Oil Mill in 2013, thus saving the company from bankruptcy. The new owner also announced an investment of 295 million kuna at that time.