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21 Feb, 2024 16:22

French food giant plans to sell Russian business – FT

Moscow has placed the shares of Danone’s local business which is controlled by its foreign parent under temporary state control
French food giant plans to sell Russian business – FT

French dairy producer Danone is looking to sell its operations in Russia to local agri-group Vamin Tatarstan, the Financial Times reported on Wednesday, citing relevant documents and people familiar with the situation. 

Under a July 2023 presidential decree, Moscow has “temporarily” nationalized all the shares of Danone Russia controlled by French parent company Produits Laitiers Frais Est Europe. Over 83 million Danone Russia shares have been transferred to state control.

According to a letter sent to Russian Agriculture Minister Dmitry Patrushev and seen by the FT, Ayrat Mukhamadeev, the director of a newly created company owned by Vamin Tatarstan, said it had agreed to pay 17.7 billion rubles ($191.5 million) to take control of Danone’s Russian business. Danone will receive $108.4 million for its equity while $83 million will go towards servicing the debt of the Russian unit.

The deal is subject to the approval of Russia’s Ministry of Agriculture before being voted on by a special government subcommittee in charge of approving exits by Western companies, FT wrote.

In the letter to the minister, Mukhamadeev said the transaction price represented a 56% discount to the business’s market value, according to an independent appraisal cited by the company. He added that Danone has agreed to provide support until the end of July of next year as the rebranded entity, now called Life & Nutrition, continues to localize production of certain ingredients to preserve “the high quality of products to which Russian consumers are accustomed.” 

Despite Western sanctions, the French food company originally said in 2022 that it would stay in Russia, defending its decision by saying it had a responsibility to “the people we feed, the farmers who provide us with milk, and the tens of thousands of people who depend on us.” However, later that year, the company announced plans to exit the market amid rising pressure from customers and activists. The company said it expected the exit to cost it $1 billion.

The Russian business included 13 factories, employed 7,200 people, and generated 5% of the company’s annual global sales of around $27 billion.

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