S8 Capital group to buy out business of U.S. elevator manufacturer Otis in Russia, to start production in August
MOSCOW. July 27 (Interfax) - U.S. elevator equipment manufacturer Otis Worldwide Corporation has reached an agreement to sell its Russian business, the company said following the publication of its report for the second quarter of 2022.
According to the press service of Russia's Industry and Trade Ministry, the Russian holding S8 Capital of Armen Sargsyan will be the purchaser. S8 Capital develops IT solutions in the financial sector, retail, telecommunications, e-commerce, and media, and it owns the Stoloto distributor of state lotteries.
According to the press release posted on Otis Worldwide Corporation's website, "Ice Development, a Russian-based investment company with a focus on the real estate sector and overseeing large-scale residential construction and building restoration projects," is technically the buyer of the assets.
"Upon transfer of ownership, Ice Development expects to resume full production at the Otis St. Petersburg manufacturing site, under a new brand name," Otis said in the press release.
"The agreement, subject to customary closing conditions, is expected to close imminently," according to the press release, though the amount of the deal is not provided.
S8 Capital's press service has confirmed to Interfax that Ice Development is part of Sargsyan's S8 Capital holding, and it is participating in the legal arrangements with Otis. The scope of the transaction has included Otis Elevator LLC, JSC MOS Otis, and CJSC Scherbinka Otis Elevator, S8 reported.
Otis's assets in Russia include a plant for manufacturing elevator equipment in St. Petersburg, with capacity up to 7,000 elevators per year, and a service network, including the provision of maintenance services for the enterprise and third-party manufacturers.
"The transaction is important not only for the particular enterprise, but for the entire industry overall. Because of lengthy negotiations, we have reached a format in which the Russian site remains fully operational, from production equipment, to technology, expertise, and jobs. Moreover, the terms and conditions of the deal guarantee the continued supply of necessary spare parts," Deputy Prime Minister and Industry and Trade Minister Denis Manturov was quoted as saying in the ministry's statement on the deal.
Manturov noted that, "the Industry and Trade Ministry will continue to support the Russian investor in developing production."
Enterprises in Russia will begin accepting orders and resume operations on August 1, Manturov said.
Otis Worldwide Corporation in March announced that it would stop accepting orders for new elevators and escalators in Russia, and that it would cease investing in the Russian business owing to the situation in Ukraine and because of interruptions in the supply chains. Otis said in the press release that activities in Russia accounted for around 2% of the company's revenue in 2021.
According to data in the SPARK-Interfax analytical system, Otis Elevator LLC generated revenue of 15.8 billion rubles in 2021, and net profit totaling 1.6 billion rubles. The company has 16 branches in Russia's regions.