Danone's Russian business might be sold to Vamin Tatarstan, Chechen Dep PM - paper
MOSCOW. March 20 (Interfax) - An agreement has been reached to sell the Russian business of French food multinational Danone, Health & Nutrition (H&N), to Russian investors, business daily Vedomosti reported on Wednesday, citing a source close to the company.
The source said dairy company Vamin Tatarstan and Chechen Deputy Prime Minister Yakub Zakriyev, nephew of Chechnya's leader Ramzan Kadyrov, are interested in buying the business. Zakriyev headed H&N from July 2023 to March 13, 2024, while the company was under the temporary management of the Federal Property Agency by order of the Russian president.
The buyers plan to pay for the business equally, the source said, adding that this has already been decided. But "on paper, meaning officially, the company is unlikely to be split in half," the source said.
Vedomosti also reported a source close to the Russian government and a source at a financial company as saying that Vamin Tatarstan and Zakriyev are interested in Danone's assets. The latter said that the French company was forced to agree to a substantially lower price for the business.
Representatives of Danone and H&N declined to comment. A spokesman for Vamin Tatarstan said that "there is no official information" and the companies are not commenting. The press services of the government of Chechnya and Russia's Agriculture Ministry, which is supposed to approve the deal, did not respond to questions, Vedomosti said.
The Financial Times, citing non-public documents, reported in late February that Danone planned to sell its business in Russia to Vamin Tatarstan. According to these documents, Vamin is owned by Mintimer Mingazov, who was appointed to the board of directors of H&N after the company was put under state management Zakriyev was appointed to head it.
In a letter sent to Russian Agriculture Minister Dmitry Patrushev, the director of a recently created company owned by Vamin, Airat Mukhamadeyev said that it had agreed to pay 17.7 billion rubles ($191.5 million) for control of Danone's Russian business, the FT said. Of this amount, 7.7 billion rubles will go toward servicing the debt of the Russian business and the rest will go toward paying for Danone's stake in the company.
Mukhamadeyev said in the letter that the price of the transaction represents a 56% discount to the market value of the business, according to an independent appraisal cited by the company.
He also said that, in order to ensure the continuity of its former Russian business, Danone has agreed to provide support until the end of July 2025, since H&N is continuing to localize production of certain ingredients in order to maintain the "high quality of products that Russian consumers are used to."
The head of Infoline-Analitika, Mikhail Burmistrov was reported as saying by Vedomosti that the fair value of Danone's Russian business, which includes 17 plants, is at least 60 billion rubles without its brand portfolio and about 80 billion rubles with the brands. The amount of 17.7 billion rubles is therefore 67%-72% less than the fair value, making it a "super lucrative deal" for the buyers, he said.
President Vladimir Putin signed a decree in mid-March cancelling the transfer of JSC Danone Russia and JSC Danone Trade to the temporary management of the Federal Property Agency. These Russian subsidiaries of the French company were renamed H&N and H&N Trade, respectively, after they were put under state managed in July 2023.
Danone Russia closed 2022 with net profit down to 5.6 billion rubles from 8.9 billion rubles a year earlier, on revenue up to 92.9 billion rubles from 85.1 billion rubles, the SPARK-Interfax system showed. Danone Trade's net profit fell to 612.7 million rubles from 1.4 billion rubles, although revenue rose to 112.7 billion rubles from 109.9 billion rubles.