6 Dec 2023 13:44

Baltika president proposes nationalizing brewer - paper

MOSCOW. Dec 6 (Interfax) - Baltika president Taimuraz Bolloyev has proposed to nationalize the Russian brewing company, which is owned by Denmark's Carlsberg Group but has been placed under the temporary management of the Federal Property Agency, business daily Vedomosti reported, citing a letter he sent to agency head Vadim Yakovenko.

A source close to the Finance Ministry confirmed that the letter was received, the paper said.

Bolloyev said in the letter that nationalization is the "only solution" given that Carlsberg rejected Russian proposals for the terms of a possible deal "with more than acceptable conditions both in terms of financial settlements and mutually beneficial use of brands" after Baltika was put under the agency's management. Furthermore, Carlsberg has carried out "unfriendly and unlawful actions," including transferring licensing rights to the Baltika brand for use in 11 countries, primarily in the CIS, for 20 years, he said.

Bolloyev said the future valuation of Baltika should factor in a number of circumstances, including the balance sheet value of the company's fixed assets, which currently amounts to 17 billion rubles. Carlsberg did not invest in modernizing Baltika's fixed assets and building new production facilities in Russia, so the brewer needs substantial funds to update production equipment and software, he said.

Furthermore, for years Carlsberg has "pursued a policy of systematically reducing production of products under the core Baltika brand," Bolloyev said. This brand accounted for only 29% of the company's sales in 2022, which was less than the share of licensed European brands such as Tuborg, while production of a number of other Russian brands, such as Yarpivo and Nevskoye, has been "reduced to zero," he said

These circumstances and Carlsberg's unilateral termination of a licensing agreement for international brands could reduce Baltika's operating and financial results by up to 50%, Bolloyev said.

Carlsberg announced plans to leave Russia in March 2022. The company said in late June 2023 that it had signed an agreement to sell its Russian business, but did not name the prospective buyer or specify the details of the deal.

However, the sale was derailed, as on July 16 President Vladimir Putin signed a decree to put 100% of Baltika, which is 98.56% owned by Carlsberg's Swedish legal entity, 0.09% by Carlsberg's German entity and 1.35% by Hoppy Union LLC, under the management of the Federal Property Agency.

Carlsberg said at the time that the decree made the prospect of selling Baltika extremely uncertain and at the end of October, commenting on the group's quarterly results, the company condemned what it said was the "illegitimate takeover of our business in Russia" and said it was taking action to protect its assets, the impairment of which it estimated at almost $1 billion.