Georgia to acquire 7.7% stake in Borjomi parent company, Alfa's stake to drop below control

TBILISI. June 15 (Interfax) - Georgia will become a shareholder of the company that owns the plants that bottle Borjomi mineral water, Prime Minister Irakli Garibashvili announced at a cabinet meeting on Monday, saying that a final decision on this has been made.

Negotiations with Borjomi's shareholders have been concluded successfully and Georgia will become a shareholder of the company, Garibashvili said, adding that the problems that Borjomi has had will be overcome.

A deal has been agreed that consists of two documents, the first of which is an agreement on the transfer of 1,104 voting shares or 7.73% in Rissa Investment Limited owned by Erasmony Limited, a Cyprus-based entity of Russia's Alfa Group, to the government of Georgia free of charge, Economy Minister Levan Davitashvili told reporters.

Rissa Investment Limited is the parent company of a group of companies that produce and distribute natural drinking and mineral water. The group's companies own water bottling rights in Georgia's Borjomi Valley (main license expires in 2034); the Russian cities of Lipetsk, Kostroma and Novosibirsk; and the Ukrainian cities of Mirgorod, Morshyn and Truskavets. Rissa's portfolio includes 11 brands, the most famous of which are Borjomi, Saint Springs, Morshinksaya and Mirgorodskaya.

Erasmony Limited will remain Rissa's largest shareholder, but its stake will decrease to 49.99%. The second largest shareholder is Black Water Limited with 38.48% and the Georgian government will be the third largest shareholder with 7.73%. The company also has smaller shareholders, with 3.79% of shares held by former Borjomi employees and other persons.

Georgia will also have a representative on the company's board of directors who will serve as chairman of the board; Erasmony and Black Water will each have two board seats.

Georgia's interest combined with the stakes of other minority shareholders will exceed 50%, so Alfa Group will no longer hold a controlling interest.

The change in ownership structure is due to the fact that one of Alfa Group's principal owners, Mikhail Fridman has been hit by western sanctions. Among other things, this led to IDS Borjomi Georgia, the actual producer of Borjomi water, having its bank accounts blocked. The Georgian company said earlier that it had to suspend operations and offer employees new terms for the duration of the crisis.

Davitashvili said the second part of the deal regulates specific relations between the partners. It is important that Georgia will be represented on Rissa's board by one director with voting rights and one director serving as an observer, he said.