Less gas - more tech. Vitaly Khomutynnik sold shares in Kernel and Ukrnaftoburinna. What will he spend the money on?

The owner of Cascade Investments Fund, Vitaly Khomutynnik, became a shareholder of two large companies with assets in Ukraine. This was a pre-war strategy, Khomutynnik assures. How has his business changed over the past two years?

Businessman and former politician Vitaly Khomutynnik spent years building his Ukrainian business. His key focus is energy and the agricultural sector, Khomutynnik told the EP in 2019. Since then, he has changed radically. "During the last three years, from 2020 to 2023, the Cascade Investments investment fund has exited, in particular, such large companies as Kernel, JKX Oil&Gas and Ukrnaftoburinnia," Khomutynnik said in a written response to Forbes' request.

Not only from them. Did he make money on these deals and where is he investing now?

Kernel is cheap, but with a plus

This year, Kernel Agroholding is probably the most mentioned public company with assets in Ukraine. The decision to leave the Warsaw Stock Exchange, which the company announced in March 2023, created a stir.

The statement led to a scandal.

Andriy Verevsky's Namsen Limited company, the owner of about 38.05% of Kernel shares, announced the purchase of the rest from minority investors for 18.5 zlotys. For most it meant big losses. The average exchange rate of the papers from the moment of placement until the beginning of the Russian aggression against Ukraine was about 50 zlotys. Before the war, Kernel bought back its shares at an even higher price — 56 each. Minorities accused Verevsky of using the market situation to buy back shares at the lowest price.

Khomutynnik agreed. He assures that he managed without losses, although he earned less than he expected. How did it happen?

Cascade Investment Fund bought the first 5% of shares (3,984,345 shares) of Kernel in October 2015 and by the end of 2017 increased its stake to 6.59%. "The plan was to get 3-4X for the investment, and if the war had not started, then, most likely, it would have happened," said the financial director of Cascade Investment Konstyantyn V'yushinskyi in a written comment.

How did Khomutynnik get out of the Kernel?

Cascade Investment sold the first part of shares on the Warsaw Stock Exchange in 2020. In the summer of 2021, the company reported that its share in Kernel is 4.99% (or 4,197,197 units). The second - during share buy-backs announced by Kernel. The third - in 2023, during delisting.

It was the only opportunity to get live money, despite the price being almost three times lower than before the Great War, says Khomutynnik. "It is not so easy to exit a company with such a stake as ours, given the limited trading limit of shares on the stock exchange," he said. "Therefore, any options, including delisting, were acceptable for us."

At the time of the purchase of the shares, the capitalization of the agricultural holding was in the range of $400–500 million, and the price was approximately the same as at the time of delisting, V'yushinskyi said. Accordingly, the company broke even on this package, he claims. "During these years, we received dividends, participated in publicly announced share buy-backs, and together we made a profit, but it was far from what was expected," adds V'yushinskyi. - In these realities, we believe that this is not bad either."

Unlike other investors, Khomutynnik has no complaints against Verevsky. "Andrii created this company from scratch and is doing everything to ensure that it not only survives now, but also develops in the future," Khomutynnik writes. "If fate ever brings us together to do joint projects and businesses, I will be happy."

In 2021, Khomutynnik sold another important asset - Cascade-Agro with more than 50,000 hectares of land - to Oleksandr Pavlyuchenko's Alfa-Capital group of companies.

V'yushinsky noted that the company was sold for $1,500 per hectare with equipment and elevators, as well as working capital, which at the time of sale amounted to more than $30 million.

Previously, "Kaskad-Agro" was supposed to sell Kernel. In February 2021, Kernel applied to the Antimonopoly Committee for an acquisition permit. "When information about the sale became public, Alfa-Capital approached us and made a better offer," explains V'yushinskyi.

Exit from the underground

Until recently, Khomutynnik's largest asset was Ukrnaftaburinnia (UNB), the country's second private gas production company in terms of production volume. It extracts fuel from the rich Sakhalin deposit in the Kharkiv region. "No one drills more efficiently than us," CEO Mykhailo Bakunenko said in 2021. The result of 2021 is 691.3 million cubic meters of gas. Only Rinat Akhmetov's Naftogazvydobuvannya has more.

According to Forbes, as of April 2023, the value of the company is about $500 million. The profit of "Ukrnaftoburinnia" in 2022 is UAH 3.8 billion, and the turnover is UAH 9.7 billion. Compared to 2021, the profit decreased by a third, and the turnover decreased by a quarter. The co-owners of "Ukrnaftoburinnia" from the mid-zero years were Ihor Kolomoiskyi, Khomutynnik and Pavlo Fuks.

What was Khomutynnik's share? The only known detail: in 2016, the businessman told the NV publication that he owns 50% of the Cypriot company Deripon Commercial Ltd, which owns 44.9% of UNB shares. The rest in Deripon, according to Khomutynnik, belonged to Ihor Kolomoiskyi. British JKX Ukraine B.V. was also among other shareholders. (Netherlands), which owned 10% of UNB. Khomutynnik sold his 20% of the parent company JKX Oil&Gas back in 2020.

On April 7, 2023, the Pechersk Court seized the corporate rights of UNB in the case of the alleged illegal transfer of the Sakhalin deposit to private companies, which has been under investigation since 2014. On May 23, UNB was handed over to Ukranfta, which is currently controlled by the state.

By this time Khomutynnik had already sold his share in the company, he told Forbes.

"Cascade Investment has agreed to an agreement [on exiting the company] at the end of 2021," says V'yushinskyi. - Due to the beginning of the war, it was greatly transformed. As a result, we left the company for half the amount we entered, but there was a large upside in the form of undistributed dividends," says V'yushinskyi. The package was sold to a Ukrainian businessman, added V'yushynskyi without revealing other details.

It is interesting that another co-owner of the company, Pavlo Fuлs, told UP about the sale of his share in UNB in September. According to him, this happened back in 2018. These changes were not reflected in the Ukrainian register of property rights — the direct shareholder companies of UNB remained unchanged.

However, Cascade Khomutynnika still owns 50% of the company "Ukrgaz Invest", which operates under the terms of a contract on joint activities with the same UNB. The second half belongs to former deputy Igor Abramovich. For the first half of 2023, the company declared UAH 17.1 million in revenue and UAH 4.7 million in net profit, according to YouControl data.

The focus narrowed

Cascade Investment Fund focused on real estate, venture capital companies and funds, Khomutynnik said in a commentary for Forbes.

The Respublika Park shopping center opened in the fall of 2021. Khomutynnik owns it together with Austrian citizen Sergey Tolstunov.

The foundation's projects also included the construction of the "Vyrlytsia" shopping center, the businessman told Forbes in April 2021. "The profitability of the mall is planned to be around 20%," he hoped. A lot has changed since then. Cascade Investment refused the Vyrlytsia project because the land lessee company had not settled the land issues at that time, explains V'yushinskyi.

What else? "We are considering projects for the construction of housing estates in Kyiv," V'yushinskyi said in a written comment, without adding details.

In 2019, the Cascade Fund created a separate Cascade Ventures division. V'yushinskyi says that now the focus is shifted to investments in funds, as well as to building a fund of funds structure.

Currently, Cascade does not have a stake in any publicly traded companies, but the fund's portfolio includes companies close to IPOs. For example, the digital insurance project Wefox, the European online broker of the real estate market McMakler, the messenger for gamers Discord.

Cascade Investment specializes in long-term investments, Khomutynnik told Forbes in 2021. At that time, the fund had about 20 deals on its account. At the same time, the businessman talked about plans to increase the share of the Cascade venture direction from 10 to 50%. It turned out that it is possible to achieve the goal simply by selling off agricultural and energy assets.