FirstFarms A/S and AP Pension has today signed a letter of intent in preparation for entering agreement about AP Pensions investment of DKK 375 million in the agriculture operated by FirstFarms A/S in East Romania. It is expected, that agreement is in place within 2-3 months, when ordinary conditions are fulfilled including a satisfactory due diligence. The agreement will, when it is finally entered, entail that both parties initiate a long-term strategic cooperation for primarily purchase and rent of land.
- It gives us even better possibility to finance our strategic goals about further growth, states Anders H. Nørgaard, CEO of FirstFarms A/S.
Søren Dal Thomsen, CEO of AP Pension states: - We intend to purchase land in Romania, as we believe that there is a large potential for increase in value of the land. The plan is to purchase extra land connected to this land, which will be value-adding. While working on this, we will get a continuous return in the form of land rent from FirstFarms. When the agreements are finally in place, it will be a long-term investment for our customers, which we expect to entail an attractive risk-adjusted return.
The agreement entails that FirstFarms A/S sells its company in East Romania with 3,000 hectares of agricultural land and grain storage and farm buildings to AP Pension. FirstFarms A/S keeps the machine park, as it will continue to be used for operation of the land.
In future, land and buildings are rented by FirstFarms A/S for a 10-year period with possibility for prolongation and preemptive right at any termination of the agreement.
Thus an agreement is expected, which in many ways is similar to the agreements AP Pension has entered with several Danish farmers.
Wants to buy more land and expand cultivation areas
FirstFarms A/S will get around DKK 125 million released for the benefit of a significantly strengthened capital resource, which can be used for acquisition of land and other investments within our business model.
- The planned cooperation with AP Pension will give us possibility to accelerate our ambitions of getting more economies of scale, which are important to give a reasonable return to our shareholders. We have already shown that we are able to do so in i.e. East Romania - but we can do much more. Thus the board will continuously evaluate how the liberated cash flow can be used the best way in the interest of our owners on the long-term, Anders H. Nørgaard points out.
FirstFarms A/S and AP Pension will jointly identify additional land, which can be included in the cooperation. According to Anders H. Nørgaard, this is to capitalise on the infrastructure already present in connection with the present operating units. This can be done optimal in cooperation with AP Pension compared to what FirstFarms can accomplish on our own. Søren Dal Thomsen points out, that FirstFarms has demonstrated that they can run a profitable operation in East Romania - even in a year with difficult cultivation conditions. Søren Dal Thomsen also points out, that the land prices in Romania can still increase from the present level. The land prices in other European countries are on levels up to 7-8 times higher and this is far from justified by yield differences and climate conditions.
No additional agreements on the drawing board
FirstFarms A/S still has a company in the western part of Romania and a company in Slovakia.
- We have also no plans about a further sale of land and buildings, says Anders H. Nørgaard.
Thus FirstFarms A/S still owns, in addition to rent contracts, 2,200 hectares of land with farm buildings, machinery and the dairy herd.
Further information at FirstFarms A/S, CEO Anders H. Nørgaard on +45 75 86 87 87
FirstFarms A/S is Denmark's only stock exchange listed company with activities in the primary agriculture. FirstFarms A/S was listed in December 2006 and has now approximately 3,000 shareholders and a share capital of DKK 47,122,410.
The activities are in agricultural companies and land in Slovakia and Romania. The company operates a total of 16,700 hectares, 2,500 dairy cows and employs 211 employees.
In 2015, FirstFarms A/S realised a turnover of DKK 111.8 million, an EBIT result of DKK -14.7 million and a pre-tax result of DKK -22.5 million.
In 2016, FirstFarms A/S expects an EBIT result in the level of DKK 0 million.
AP Pension has over 100.000 customers, assets of 13,500 mEUR and annual deposits of 1,000 mEUR.
You can find more information about AP Pension at this link: http://www.appension.dk/English
