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. Last Updated: 07/27/2016

Black Earth Farming Plans $300M Offer

Swedish-owned agricultural firm Black Earth Farming said Thursday that it planned to raise up to $300 million by the end of the year to continue to expand its land holdings across southern Russia.

Through a public offer on Stockholm's alternative First North stock exchange, the Russia-based company would raise $200 million to $300 million by selling depository rights, most likely in December, said Gustav Wetterling, Black Earth's head of investor relations.

"We plan to purchase more land and will continue to ramp up operations," Wetterling said by telephone from Stockholm. "We are now looking to buy fallow land near the land that we already own to take advantage of economies of scale."

The company leases and owns more than 260,000 hectares of farmland in the Kursk, Tambov, Lipetsk, Samara, Voronezh, Kaluga and Ryazan regions in the fertile Black Earth zone, the country's traditional breadbasket.

Principal shareholders Vostok Nafta Investment and Investment AB Kinnevik together own 52.5 percent of the company.

The Swedish-owned company is one of a small but growing number of foreign players looking to run large-scale farming projects in the country.

Black Earth was founded in 2005 by company president Michel Orloff, a former executive director of Invesco in Moscow and managing director for the Carlyle Group in Russia.

Swiss-born Orloff said Thursday that the company would seek to supply the raw materials for food products that currently are imported for even simple foods like pasta.

"Russia has to import everything right now, and I see an enormous import substitution potential," Orloff said.

The company has harvested 50,000 hectares of crops, mostly wheat, and also barley, corn, rapeseed and sunflower so far this year, and hopes to raise this figure to 120,000 hectares.

Working the company's land are about 1,200 employees, including a small number of agronomists from Sweden and Britain.

Wetterling said the company also planned to raise productivity through a combination of staff training and the introduction of new technology.

"We are aiming for the complete transfer of technical skills on all levels -- from the international agronomist all the way to the tractor driver," Wetterling said, adding that the company was putting GPS guidance systems into its tractors.

At present, all of Black Earth's output is consumed domestically. The firm is interested in diversifying the ways in which their produce is consumed.

"Biofuels, for example, are one of the directions the firm is interested in," Wetterling said. "We are open to all possibilities."