Carlsberg selling Baltika to senior management, shareholdings in Kazakhstan and Azerbaijan removed from transaction

MOSCOW. Dec 3 (Interfax) - The Carlsberg Group expects to close the transaction to sell Baltika Breweries in the coming days, the Danish concern said in press release.

"The deal will be a management buy-out. The new controlling shareholder of Baltika Breweries will be a company owned equally by two longstanding Baltika employees, currently holding leading positions in the company. The two individuals will take over the management of Baltika Breweries as General Manager and Deputy General Manager, respectively," according to the press release.

The transaction will result in the Carlsberg Group receiving an undisclosed cash consideration, as well as retaining its shareholdings in Kazakhstan and Azerbaijan that currently belong to the Russian legal entity.

"As part of the agreement, the parties will settle all outstanding legal disputes, including IP rights issues [to sell the Russian asset]," the group said.

The announcement of the transaction followed the publication of the decree of President Vladimir Putin on December 2, which removed Carlsberg's assets from temporary Russian state management.

The document rescinds the provisions of the decree dated April 23, 2023 and amended on July 16, 2023, according to which a 98.56% stake in Baltika Breweries LLC owned by Carlsberg Sverige Aktiebolag, 1.35% owned by Hoppy Union LLC and 0.09% owned by Carlsberg Deutschland GmbH, were placed under government management.

Reuters reported, quoting minutes of as meeting of the Russian government's commission for control over foreign investments, that the commission had approved the sale of Carlsberg's Baltika Breweries for 34 billion rubles or $320.75 million to the Russian JSC VG Invest.

VG Invest was registered in August and is managed by Yegor Guselnikov, Vice President at Baltika. Guselnikov also co-owns Brewery Development Centre (BDC) with Alexander Tolmachev who, according to his social media profile, used to work for Heineken in Russia.

BDC owns a number of companies established this year, including New Breweries LLC and Project 650. The latter is run by Alexei Pyatkin, who is also CEO of Carlsberg-owned Hoppy Union.

Carlsberg Group, the largest foreign investor in the Russian beer market, announced plans to exit Russia in March 2022. At the end of June 2023, the company said that it had signed an agreement to sell its Russian business, without disclosing the future owner of Baltika or the deal's parameters. However, the sale did not take place and the Russian president signed the decree on July 16, 2023 placing the Carlsberg assets under the Russian Federal Property Agency's (Rosimushchestvo) administration.

Carlsberg was forced to acknowledge that the prospects for the sale became extremely uncertain in the wake of the decree. In late October, when commenting on its quarterly results, the company described the situation as "illegal business seizure in Russia" and announced plans to defend its assets, which it had written off in its accounts at nearly $1 billion.

In October 2023, Carlsberg Group terminated its licensing agreements with Baltika for the production and sale of all group products, including international and local brands. In response, Baltika took the matter to court. On October 19, 2023, the court imposed interim measures, prohibiting the Federal Service for Intellectual Property (Rospatent) from registering the termination of trademark usage rights for brands such as Holsten, Kronenbourg, Tuborg and Seth & Riley's Garage. In December 2023, the court of first instance upheld Baltika's lawsuit against Carlsberg, ruling the unilateral termination of the licensing agreements for the production and sale of these brands invalid.

The case was postponed several times.

Taimuraz Bolloyev became president of Baltika in July 2023. He had previously headed the company for 13 years, until 2004. He was added to the EU sanctions list in June this year.

Vedomosti reported in the autumn of 2023 that Bolloyev had suggested nationalizing the company, saying Carlsberg had not accepted the Russian side's proposal concerning financial calculations and the mutually profitable use of the brands after the transfer of Baltika to the management of Rosimushchestvo. However, Russian Finance Minister Anton Siluanov said in late 2023 that the Russian authorities had no plans to nationalize Baltika at the time.

Baltika is Russia's second largest brewing company. It operates eight breweries.