At first Ukrainian billionaire Oleg Bakhmatyuk seemed a godsend to 130 unlucky North Carolina farmers. But in the end the old adage prevailed: “If it looks too good to be true, it probably is.”
In early 2011, Bakhmatyuk swooped in and snatched up the bankrupt Townsends company and offered three-year labor contracts. With the 38-year-old’s proven track record, prospects were high.
But as it turned out, the majority owner of London-listed Avanguardco – Ukraine’s largest egg producer – overlooked multiple facets that would later lead to the further demise of Townsends and deals cut with farmers, as well as some 1,200 local jobs.
Bakhmatyuk said the quality of consulting services was partially at fault for the poor decision to buy Townsends. But he did accept part of the blame for the $25 million acquisition.
“This was an erroneous decision on behalf of the investor,” Bakhmatyuk told the Kyiv Post, referring to himself in the second person. “(America’s) market has not yet recovered, even though the original estimate was that it would (revive) within seven to eight months.”
But five months after purchasing the bankrupt Townsends poultry factories, and after spending an additional $7 million to renovate them and then hemorrhaging money at a rate of $7 million dollars a month, Omtron USA, the shell company Bakhmatyuk used to purchase Townsends, announced that it would shutter all operations in North Carolina. In November 2012 the company filed for bankruptcy. Omtron managers disappeared after that, leaving the company’s debts unpaid.
It was a small victory for farmers since the bankruptcy requires Omtron to follow a court-mandated time frame to liquidate its assets. But those close to the case told the Charlotte News & Observer in February that they won’t hold their breath.
“Where it’s going to go from here and what’s going to happen, I don’t know,” Kim Decker, a poultry marketing specialist with the North Carolina Department of Agriculture, told the newspaper. “It depends on how they proceed. Everything seems to have been a stalling tactic thus far. Is bankruptcy another one of those? I don’t know.”
Bakhmatyuk said he’d like to wipe his hands clean of the deal. “We announced bankruptcy to finish with all the processes (such as lawsuits) within the next seven or eight months.”
He said he expects the company’s total loss in the deal to grow from $25 million to $55 million by the time all bankruptcy and foreclosure procedures are finished.
Before Bakhmatyuk bought Townsends, the company had been forced into bankruptcy because of rising corn costs and falling chicken consumption in the U.S. The businessman saw an opportunity in Townsends and what he thought was a way around the costs. His plan was to export cheap corn from Ukraine to feed local chickens, then turn around and buy those chickens from farmers to sell across China, the Middle East and Russia.
What he failed to consider, however, were the export duties Ukraine would tack onto the corn, import inspections by the U.S. of the corn entering North Carolina and import restrictions by China and Russia.
Making the situation more complex are lawsuits filed in state and federal courts by some 130 chicken farmers for breach of contract on the part of Omtron. Two equipment manufacturers that installed machines in one of the plants have also sued for breach of contract and intent to defraud. The company also owes its largest creditor, the town of Mocksville, $760,000 for lease payments on equipment. Omtron is disputing that claim. And two law firms it once employed say they’re still owed nearly $300,000.
One of the farmers included in the lawsuit is a third-generation farmer named Mickey Bowman, who told the Charlotte News & Observer he thought Bakhmatyuk was “filthy rich and had no idea what he was getting into; that’s exactly what it sounded like.”
Bakhmatyuk said the case has become a politically charged issue on the local level in North Carolina.
“It has become political – at whose cost would they make gains if not at the cost of foreigners?” he rhetorically asked.
Bakhmatyuk, who made Forbes’ list of the “World’s 20 Youngest Billionaires” in 2011, first entered the egg business when he purchased Avangardco in 2003. He then gained notoriety while working at Ukraine’s state oil and gas company Naftogaz Ukraine, where he was deputy CEO. But in 2007, he left Naftogaz to focus on his agribusinesses.
In 2010, he took Avangadco public on the London Stock Exchange, selling a 22.5 percent stake in the company and raising $208 million dollars in the process. He then merged the company with his agro-industrial company, UkrLandFarming, creating one of Ukraine’s largest vertically-integrated businesses.
Today Avangardco is the world’s second-largest producer and distributor of eggs and egg products, according to the company’s website.
Kyiv Post staff writer Christopher J. Miller can be reached at [email protected], or on Twitter at @ChristopherJM.
