Oleksandr Yaroslavskyy’s DCH Group was the general partner of the III Global Ukrainians Forum. Onе of Ukraine’s most successful businessmen and philanthropists, he plays a special role in the development of the city of Kharkiv.
He is called a talented developer, Ukraine’s best football president, Kharkiv’s largest private investor, a patriot, and the “King” of his native Kharkiv, one of Ukraine’s largest cities, known for its industrial plants and university centers. According to various European media, Oleksandr Yaroslavskyy is one of the most influential personalities in Ukraine; Forbes magazine rates him as one of the country’s ten wealthiest people.
None of the other Forbes top ten has built their own business without the use of administrative resources (by being in power politically or “near” the sources power). Yaroslavskyy created DCH while being distant from politics and at times opposed to existing political powers.
Many experts are trying to determine how he succeeded. Most are inclined to think that the uniqueness of Olexander Yaroslavskyy is in the symbiosis of his experience and strong intuition, part of which is the ability to feel of nerve of the Ukrainian economy.
He was the founder of several leading companies in various industries, seeing their potential grow over time, and he would divest himself of these investment at their peak. Nina Mishchenko, editor-in-chief of Forbes Ukraine wrote: “For many Ukrainian businessmen the behavior of DCH Group founder Oleksandr Yaroslavskyy is a marker of behavior in the market. Yaroslavskyy rarely buys something expensively and almost always exits of the projects at the right time, generating high profits”.
The birth of the group
In the spring of 2016, Oleksandr Yaroslavskyy met with students of the Beketov National University of Urban Economics in Kharkiv. Responding to questions about the first steps in business, he said: “My father wasn’t Rothschild or Rockefeller, I had no starting capital, I was just like you, started, wore some jacket. So I had just came and earned money … If you are talented, I am sure you will be able to start a business from scratch”.
And his story really is almost a textbook case of a self-made man. He was born into a family of ordinary physicians and educated at the Kharkiv Academy of Food Services. After that, he served in the Soviet army for three years, then took some legal courses, was an inspector of the Anti-Corruption Squad in Kharkiv, wrote his thesis, worked in a food institute. The collapse of the Soviet Union and the liberalization of the economy allowed him to start a business. However, he could truly prove himself in the process of establishing UkrSibBank, Ukraine’s largest commercial bank. His arrival at the bank in 1998 was the beginning of a new era in which a second-rate financial institution became a bank that served the city budget, initiated activities in foreign markets, and constantly increased the volume of work with individuals and corporate structures.
This profitable was unexpectedly put up for sale about 10 years ago, surprising many people. At the peak of the development of the banking sector, Yaroslavskyy, as the major shareholder of the financial institution, decided to sell the bank’s assets to the international financial group with French roots, BNP Paribas. He gradually transferred control of UkrSibBank to the French group while concentrating on the consolidation of assets belonging to him within the DCH group.
And he did this at the right time. As market experts said, the global financial crisis, that began more than two years following the deal with BNP Paribas and which in Ukraine was aggravated by Ukraine’s own economic problems, made the Ukrainian banking sector investment unattractive. If the decision to sell the asset had been taken later, it would have generated significantly less money for Yaroslavskyy; this would also have been the case had he sold his assets before 2005.
This is the most significant, but not the sole example of Oleksandr Yaroslavskyy’s ability to fund the right moment to acquire and dispose of assets.
“I bought a company which is in a crisis, organise the work and sell it with a profit. For example, I built and sold an oil extraction plant, built UkrSibBank, was among the shareholders of Kyivstar at the beginning. There are many projects”, said Oleksandr Yaroslavskyy in an interview.
And indeed, there is something to remember: within the DCH holding group, and prior to its establishment, Yaroslavskyy was an investor in Ukraine’s telecommunications market at its earliest beginnings as the co-owner of the mobile operator, Kyivstar. In various years, amongst its assets were Nadra Bank, Northern Mining, the XXI Century Construction Company.
When Ukrainian businessmen had access to relatively cheap Russian gas, the DCH Group owned the largest producer of nitrogen fertilizers. But in 2011 the group sold JSC Azot to another Ukrainian businessman, Dmytro Firtash. According to media reports, Oleksandr Yaroslavskyy’s capital gain on this asset was approximately $800 million. In current conditions, such a price would have been impossible because in the current energy market, production of products, which are dependent on natural gas, is not a profitable business. A similar story happened with the Merefa glass factory, which DCH Group sold in 2011 to the Turkish company Sisecam for EUR 32 million.
During the period of the active development of the air transportation market, Oleksandr Yaroslavskyy was one of the initiators of the revival of Kharkiv Airlines, founded in 1998. But he withdrew from the shareholder group before the industry’s problems started. And last year the airline ceased operations due to the poor economic situation and the reduction in the tourist market.
Investing in the international reputation of Ukraine and Kharkiv
Football has a special place in Oleksandr Yaroslavskyy’s successes. The relationship with the sport consists of two parts: his ownership of the Metalist Kharkiv Football Club and participating in the preparation of Kharkiv for Euro 2012.
Oleksandr Yaroslavskyy joined the club in 2005. At that time the team was in a deep crisis, and played in the lower divisions of the Ukrainian championship. The businessman began to invest actively in the development of Metalist, which provided results. In the next 7 years the club set a national record, managing to win the bronze cup of the Ukrainian championship six straight times. It became a regular participant of European Cup battles and twice reached the UEFA Cup quarterfinals. The club was the sports pride of Kharkiv. In addition to inviting the best experts and working on Metalist’s infrastructure, Yaroslavskyy thought about the future, creating a modern children’s football academy within the club. “My Metalist: this is the club into which I put my heart and more than $200 million,” the businessman said in one of his interviews.
He did not miss a single game, always supported the team and did not spare funds for its maintenance. Many experts called the Metalist a sight for sore eyes for Yaroslavskyy. That is why many events at the end of 2012 shocked everyone, when businessman suddenly sold his club. Some analysts believed that this was part of his entrepreneurial skills, because one and a half or two years after this the value of Ukrainian clubs fell significantly. But most experts believed that the Yaroslavskyy was made to give the club and its related sports infrastructure to the young oligarch Serhiy Kurchenko, one of Victor Yanukovych’s assistants: no one could refuse those people at that time in Ukraine, without risking one’s own his future).
The change of ownership left an impact on Metalist. Only three and a half years after these events, the legendary club, which last year celebrated its 90th anniversary, has lost its professional status and is on the verge of being dissolved.
The Creator of Euro 2012
Yaroslavskyy’s passion for football inspired him to undertake another ambitious project: the holding of Euro 2012 football matches in the city. In 2007, when Ukraine and Poland were selected to hold the championship, Kharkiv was not even considered as a site. It was appointed an alternate for the city of Dnipro, which had almost finished constructing its modern stadium and more or less met conditions. But Yaroslavskyy tackled the issue. He announced that Kharkiv would join the competition for the right to host Euro 2012, initiated a program to modernise the sports infrastructure, and began to rapidly reconstruct the stadium. And ultimately changed the UEFA’s mind.
Moreover, foreign journalists called Kharkiv an example of the preparation for the tournament, and Polish TV made a documentary movie about Yaroslavskyy, called The King of Kharkiv. And it’s no wonder. This businessman invested in $300 million in preparatory work, which is the largest private investment in the Ukrainian part of Euro-2012. The stadium (Yaroslavskyy’s share was 30%) was renovated in cooperation with the government. The Kharkiv International Airport was updated through a private enterprise-government joint effort, each side investing 50% of the amount required. The government rebuilt the airfield and the businessman reconstructed the old airport facilities and built a new passenger terminal (it remains the only private terminal in Ukraine). To fulfill the requirements of UEFA for host cities, Yaroslavskyy financed the hotel Kharkiv Palace, the first five-star hotel in the city; sports centers and academies and more were fully funded by Yaroslavskyy. All this allowed Kharkiv to host matches of Euro-2012.
Until now, experts still have been arguing what motivated the businessman to enter into this project – only love for his city or perhaps entrepreneurial flair. In fact, after Kharkiv’s joining the battle for Euro 2012, a large-scale crisis began in Ukraine’s construction industry. And only Yaroslavskyy’s enterprises, which belonged to this sector of the economy, weren’t affected because they were fully involved in the preparatory work for Euro 2012. “When I started to invest in Kharkiv, to make it a host Euro 2012 city, many were perplexed, because the economic situation was not conducive to large-scale investments in the region. But this step allowed for the implementation of unique designs, creating additional jobs, and providing work for contracting organizations … ” Oleksandr Yaroslavskyy said in an interview.
Unlike Metalist’s sports infrastructure, which Yaroslavskyy sold with the football club, all other buildings created for Euro 2012 remained in his ownership. For example: the Kharkiv International Airport and Kharkiv Palace hotel. Today, he actively uses them to attract the attention of Ukrainian and foreign investors to the city. They are places for holding an international aviation conference (e.g., Routes CIS), industry, agricultural activities (e.g., Agroport), investment meetings and much more. “For me, these forums are an opportunity to talk about Kharkiv, its prospects and possibilities. You need to remind others about yourself and show everything that will interest people. This is my city. I do for it all that I want. I do not know if that’s a lot or a little: that’s for someone else to evaluate. We bring investors here to show them the city”, Oleksandr Yaroslavskyy said in a recent interview with Forbes Ukraine.
It should be noted, that such work is greatly appreciated by the current Ukrainian government. “He has very good international contacts, including large and very large investors – European, American, and I really hope that he will take part in the privatization processes for current investment projects. As someone who has built a lot of things, I think he will be very effective, “- Borys Lozhkin, former head of the Presidential Administration of Ukraine recently said.
However, Oleksandr Yaroslavskyy is being cautious with his investment activity after the events of 2012. Today, financial institutions, industrial operations (including mining companies), development companies, real estate objects, as well as the Caravan network of shopping centers (Yaroslavskyy owns this asset jointly with US corporations Citigroup and Apollo) are part of his DCH group.
Experts believe that the businessman simply is looking for an effective investment. “At the moment Yaroslavskyy has accumulated considerable liquidity. And now he can buy almost anything. After all, it is very cheap, and the deal will be profitable in any case. In my opinion, today is a very opportune time for Yaroslavskyy”- Vitaliy Shapran, a member of the Ukrainian Society of Financial Analysts, has said.
At the beginning of this year, experts have made predictions into which industry the businessman could invest money. “It can be any company, in any direction, where there is a return for one’s efforts. We are monitoring the situation, if there are interesting projects, we will deal with them “, Yaroslavskyy said in an interview. It has been rumoured that he may buy the Ukrainian assets of the Russian Sberbank. There has been talk about Yaroslavskyy’s intention to significantly increase his influence in the retail sector. But until his return into intensive investment activity has been highlighted only by the acquisition of the Kharkiv Tractor Plant (KTP). This purchase came as a surprise to experts.
Of course, the asset is interesting. At one time it was produced up to 70 thousand tractors per year. It is one of the leaders of Ukrainian engineering and is a socially significant enterprise in the city (there are about 3 thousand employees). But recently, the company was in a period of decline. Furthermore, numerous attempts to raid it in order to control it have almost blocked the operation of the plant. Experts believe that in these circumstances, the asset was bought for a very good price. “The specific amount of the transaction depends on the size of the sold shares. In view of the plant’s revenue in 2015 of $23 million, such a transaction can be valued at $10-20 million, but any conflict will reduce this estimate,” Roman Topoliuk, Concord Capital investment company analyst said.
However, other experts believe that only Oleksandr Yaroslavskyy is able to rebuild the company and restore it to its former glory, as with many other assets, which the businessman acquired. At the present time he has already restarted the plant’s production after four and a half months of downtime, unblocked bank accounts, paid the workers salaries, and opened a credit line to rebuild production. And all this is done despite the lack of state support, the strange judicial processes, which paralyse the company’s activities, voices of political populists and other “surprises” which emerge during these difficult days for the country.
Experts are convinced that “Mr Timely” would not have invested in KTP without confidence in the future growth of the asset. The same was true with different projects in the past: UkrSibBank, Metalist, from by gas dependent enterprises, which produced fertilizers, to obtaining by host city status for Euro 2012. Therefore, the Ukrainian machine-building sector has waiting in anticipation. If no one interferes with Yaroslavskyy, the KTP will grow to new heights. Ukrainian tractors could be used not only in Ukraine, but also in global markets.