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More than a year after the brewer Carlsberg announced its intention to sell its assets following Moscow’s invasion of Ukraine, the company has reached a deal to sell its operations in Russia.
The Danish group, which has more market exposure than any other international brewer, had previously warned that the sale would cost it $1.4 billion. On Friday, the company did not name the buyer of the business or provide any financial details about the sale.
Carlsberg owns Russia’s largest and most popular beer brand, Baltika, which accounts for 9% of its total revenue in the country. Chief executive Cees’t Hart said the agreement was an important milestone in a “highly complex separation and sale process”.
“While this was an extensive process, it was important to us to deliver the best possible solution for all stakeholders, including our more than 8,000 employees in Russia,” said Hart.
The company said the deal would be approved by the Russian government.
Since last year, Western companies seeking to leave Russia must meet an ever-expanding set of strict criteria to be considered by a government subcommittee that issues exit permits.
These criteria include offering Russian buyers a discount of at least 50% of the property’s value and a “voluntary” contribution to the budget of 5% to 10% of the sale price.
Carlsberg may have to wait months for government approval as the subcommittee is overwhelmed with thousands of applications, according to people familiar with the matter.
After last year’s invasion, many Western consumer goods companies announced their intention to withdraw from Russia, but many continued to sell in Russia, citing business difficulties and regulatory hurdles.
According to estimates by the Kiev School of Economics, only 7.5% of foreign companies have completely withdrawn from Russia, while 37% have announced their withdrawal, and 41% are still in Russia, some of which are still growing their market share.
“2022 will be a great year for Baltika as many competitors exit the market early: its revenues are up 20% year-on-year, and its net profit Almost doubled.”
Belgian brewer Anheuser-Busch InBev is in talks to sell its stake in a Russian-Ukrainian joint venture to Turkish partner Anadolu Efes. Anheuser-Busch InBev’s first-quarter performance report last year showed a non-cash impairment of US$1.1 billion related to the transaction. The joint venture has 11 breweries in Russia and employs about 3,500 people.
Heineken expects to record a non-cash impairment charge of EUR 400 million upon exiting Russia. In a recent trading update, the Dutch brewer said it had made progress in transferring ownership of the business and submitted an application for approval to Russian authorities, without specifying a timeline or buyer. Heineken, which employs 1,800 people, gets 2% of its global sales from China.
Carlsberg, which also produces Kronenbourg, Grimbergen and Somersby ciders, first bought a stake in Baltika in 2000 and became majority shareholder in 2008 before buying the group outright and delisting it.
Seth Hart told the Financial Times earlier this year that he wanted to insert a buyback clause in the agreement to give his successor the chance to return to Russia, depending on the state of the country in 10-20 years.