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16 Jul, 2023 14:42

Putin ‘temporarily’ nationalizes assets of foreign companies

The Russian president has signed a decree imposing temporary state control over foreign shares of food and beer manufacturing giants
Putin ‘temporarily’ nationalizes assets of foreign companies

Russia has temporarily nationalized the assets of two major food and beer manufacturers. All foreign shares of Danone Russia, which is controlled by its French parent company, and Baltika Breweries, controlled by the Danish Carlsberg Group, have been handed over to the Russian Federal Property Management Agency following a presidential decree. 

Both foreign giants recently announced plans to sell their businesses in Russia. Over 83 million Danone Russia shares owned by Produits Laitiers Frais Est Europe were transferred under state control, the decree published on the official government website on Sunday said. The decision also covered almost 100% of shares within Baltika Breweries’ registered capital.

French food company Danone recently faced pressure from clients and activists to exit the Russian market amid the conflict between Moscow and Kiev. The company initially defended its decision to stay 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.”

The company’s business in Russia included 13 factories, 7,200 employees, and amounted to 5% of its annual global sales of around €24 billion ($27 billion). In October 2022, Danone announced it was seeking to sell its business in Russia in a transaction that could result in a write-off of up to €1 billion, Western media reported.

According to RIA Novosti, Danone was seeking to keep the right to buy back the shares in its Russian business and keep a share of up to 25% of its capital, as well as a place on the board. By February, the company chose around 20 potential buyers for its Russian assets, the news agency said. 

In June, it was reported that the deal would be closed no sooner than the first half of 2024, reportedly because Danone was delaying the process itself, RIA Novosti added.

Carlsberg Group announced it was stopping investments in its Russian businesses in March. 

In June, it said it had reached an agreement to sell its Russian assets to an unnamed buyer for an undisclosed amount. The Danish company refused to provide any details on the deal, citing the need to “ensure that the approval processes go as smoothly as possible” with the Russian authorities. 

Baltika Breweries was one of the biggest beer manufacturers in Russia. However, according to Russian business daily Kommersant, all global players on the Russian beer market, including Carlsberg Group, Dutch Heineken company, and Belgian Anheuser-Busch InBev, were cutting their production in Russia in 2022 while local companies were on the rise. 

Data published by the Kiev School of Economics in April shows, however, that fewer than 10% of foreign companies had divested from Russia more than a year after the start of the conflict between Moscow and Kiev, despite the unprecedented barrage of sanctions unleashed by the US and its allies against Russia.