On 14 January 2020, Baromfi-Coop announced the acquisition of Hungarian-based turkey processing company SaGa Foods. Scope considers Baromfi-Coop’s business risk profile to be strengthened by the bolt-on acquisition because: 1) SaGa Foods is ranked first in the Hungarian turkey processing industry, owning well-known brands like FÜSTLI and FÜSTLIZER; 2) SaGa Foods has a customer portfolio of multinational retail chains; and 3) it improves Baromfi-Coop’s mix of poultry species, as the company was previously solely exposed to chicken. Although Scope expects a limited earnings contribution in the current year, Baromfi-Coop’s profitability (EBTIDA margin) should be positively affected by synergies arising from central functions, as well as combined sales and supply channels.

Scope’s rating scenario anticipates that Baromfi-Coop’s key credit ratios will remain in line with the agency’s estimates. For instance, leverage (Scope-adjusted debt (SaD)/EBITDA) is expected to be around 3.6x at the end of 2020. The acquisition price of a single digit billion amount in Hungarian forints will be financed by the proceeds of Baromfi-Coop’s bond issuance (HUF 29.4bn) in November 2019.

This publication does not constitute a credit rating action. For the official credit rating action release click here. On September 19, 2019, Scope assigned an issuer rating of BB- on Baromfi-Coop Kft. The Outlook is Stable.