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FirstFarms expands into pig production, and Hungary

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You can take the farmer out of Denmark, but removing their penchant for pig farming seems altogether more difficult.

FirstFarms, the Copenhagen-listed farm operator in eastern Europe, which has long trailed the potential to enter pig production on Wednesday revealed it had made the move, buying in buying pork producer Dan-Farm Holding.

The all-share, DKK11m acquisition will give FirstFarms an 80% share in Dan-Farm Hungary, which has 2,200-strong sow herd, and produces some 70,000 piglets and 5,000 slaughter pigs a year.

"With this agreement, FirstFarms gets pig production into the portfolio," said the group, which currently operates in grain and milk sectors, adding that its move into pork would help "to secure a larger risk spread and better earnings".

And the deal is was not the end of the group's ambitions in the pork sector, with it flagging "potential for expansion of the production in the future, both with further slaughter pigs and sows".

Danish pre-eminence

Danish farmers are well known in Europe for punching well above their weight in pork output, ranking fifth in the European Union league, behind France, Germany, Poland and Spain, despite the country's relatively small population.

Indeed, with domestic demand relatively small, Denmark, with a population of some 28m pigs on 5,000 farms, is particularly renowned as a pork exporter, selling 90% of its output abroad.

For FirstFarms, meanwhile, the announcement comes amid a year of reforms, with the group also amidst negotiating a DKK375m deal with pension fund AP Pension, which will see the farm operator sell some of its Romanian land in return for investment capital.

FirstFarms added on Wednesday that it was holding "positive" talks with AP Pension, "and it is expected that the final agreement can be ready before the end of the year".

'Significant synergies'

The Dan-Farm Holding deal will also expand FirstFarms into a third country, Hungary, from its existing operations in Romania and Slovakia.

However, the Dan-Farm Hungary operations are "within driving distances" of existing FirstFarms sites, raising the potential for releasing "significant synergies" from the acquisition.

FirstFarms said that the deal would lift by DKK5m its pre-tax profit prospects for 2017.

By Mike Verdin

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