27 Feb 2023 12:05

Philip Morris questions ability to sell Russian business in current circumstances

MOSCOW. Feb 27 (Interfax) - Philip Morris International (PMI), whose attempts to sell its Russian business over the events in Ukraine have been unsuccessful so far, has doubts whether this is even possible given current regulation of transactions involving foreign investors in Russia.

The tobacco group has held negotiations with at least three "serious" potential buyers, but talks have stalled, PMI CEO Jacek Olczak in an interview with the Financial Times.

Under current regulations, the Russian authorities can dictate almost all the terms of a transaction, including the valuation, access to cash flow and the new owner's dividend policy, he said, remarking that now he does not have a buyer who could execute the transactions or hope of finding one.

But the company cannot just abandon its Russian assets, despite facing criticism over the protracted exit, Olczak said. "I cannot just lose the patience and I leave it. It's their money, it's not my money, I'm managing this for them," he said. However, the company has not made a decision not to leave Russia, Olczak said.

Russia and Ukraine accounted for 8% of PMI's $31.7 billion in revenue last year.

PMI said in its February report that it is constantly assessing the evolving situation in Russia, including recent regulatory restrictions on the market resulting in very difficult conditions that must be fulfilled to secure the authorities' approval for any divestment. The company has suspended new investment and scaled back operations in Russia.

PMI began working in Russia in 1992, when it opened an office in the country. The group's brand portfolio includes Marlboro, L&M, Bond Street and Parliament, among others. The company also produces tobacco sticks for its Iqos tobacco heating system.

In Russia, PMI owns the Philip Morris Izhora tobacco factory in Leningrad Region, and Philip Morris Sales and Marketing, which distributes cigarettes through its branch network in more than 100 Russian cities. The group decided in the fall of 2021 to close its factory in Krasnodar Territory due to the contraction of the tobacco market.