The Ukrainian Prosecutor General's Office (PGO) has raided the Kyiv headquarters of the country's agricultural giant Astarta, the company said in a statement on September 6, adding that the PGO's move looks like "unprofessionalism, or the open pressure on business".

The PGO has not yet commented on the raid, but an analyst note from Kyiv-based brokerage Concorde Capital points out that the timing — the raid took place as Astarta launches its autumn sugar production campaign — raises suspicions. 

Astarta said it believes that the raid of "armed law enforcers" violates procedural requirements initiated by the PGO. “We consider the action of law enforcers are excessive and groundless," according to the statement e-mailed to bne IntelliNews.

"The corporate management of Astarta's enterprises complies with all the principles of transparency," the statement reads. "The company today, as always, has cooperated constructively with regulators on giving testimony, explanations and documentation."

The PGO's move could be a negative signal for foreign investors, specifically, due to the fact that in May, Fairfax Financial Holdings, a Canadian asset manager with $27.6bn in equity investments as of the end of March, completed the acquisition of the second largest stake in Astarta, controlling 28% of the shares. Viktor Ivanchyk, Astarta’s founder and CEO, remains the largest shareholder with a 36% stake

Meanwhile, a court in Kyiv has recently greenlighted the arrest of accounts of Tsukoragroprom, Khmelnytske and Volochysk-Agro, which are part of Astarta holding. The accounts are held in by ING Bank’s Ukrainian operations, according to Interfax news agwncy.

According to court documents, managers of Tsukoragroprom supplied 85,000 tonnes of liquid industrial ammonia to five Astarta enterprises for UAH715mn (€23mn) in 2016-2017, including two above-mentioned enterprises.

Alexander Paraschiy at Kyiv-based brokerage Concorde Capital believes that "it does not look normal" that the searches are being conducted at the most important time of the year for Astarta, when the company is starting its thee-month sugar production campaign and is activating all its sugar plants (just a day before, Astarta reported the commissioning of its first sugar factory for this season).

"Such timing raises suspicion that prosecutors might be aiming at causing maximum damage to the company’s operations," the expert wrote in a research note on September 6.

"Meanwhile, we have no other choice but to believe that all these actions won’t harm Astarta’s operations, as the company claims," Paraschiy added. "From what we see as the prosecutors' background for the investigation, it is hard to find any crime in selling ammonia among Astarta’s subsidiaries for about $280 per tonne, which more or less corresponds to market prices in the region.”

Ten years ago, the share of sugar production in Astarta’s overall revenues stood at more than 70%, but since then the company has successfully diversified. By 2016, sugar’s share in Astarta's revenues had dropped to 48%, while soybean processing still at 20%.