Russian President Vladimir Putin signed a decree on Sunday imposing temporary control over foreign shares of two food and beer production companies.
According to a decree, the Russian government placed foreign-owned stakes in Danone Russia and Baltika Breweries under the “temporary management” of the government property agency Rosimushchestvo.
Russia Acquires ‘Temporary Control’
Following a presidential decree, all foreign shares in Danone Russia, held by its French parent company, and Baltika Breweries, which the Danish Carlsberg Group manages, have been transferred to the Russian Federal Property Management Agency.
Recently, both foreign companies declared intentions to sell their business in Russia. According to the decree posted on the official government website on Sunday, Produits Laitiers Frais Est Europe transferred over 83 million shares of Danone Russia under the state’s control. The decree also said that the Danish brewer Carlsberg’s shares in the Russian-based Baltika Breweries had been placed under the control of the state.
The decision comes few months after the state took over the Russian subsidiaries of Germany’s Uniper and Finland’s Fortum in April. The Kremlin warned at the time that it might seize additional Western assets temporarily in retribution for foreign measures against Russian businesses abroad.
Foreigners’ stake in Danone Russia, Baltika Breweries placed under temporary management. The corresponding decree was signed by Russian President Vladimir Putin:https://t.co/Lyy3Un0Riu pic.twitter.com/YyIIFBH2A5
— TASS (@tassagency_en) July 16, 2023
Danone
In the wake of the conflict between Moscow and Kyiv, Danone recently came under pressure from consumers and activists to leave the Russian market. In its first justification for staying, the firm said it owed a duty to “the people we feed, the farmers who provide us with milk, and the tens of thousands of people who depend on us.”
The company’s business in Russia includes 13 plants and 7,200 people, accounting for 5% of its annual global sales of roughly €24 billion ($27 billion). Danone declared in October 2022 that it intended to sell its company in Russia, which might result in a write-off of up to €1 billion ($ 1.1 billion), as reported by Western media.
According to Russian state media RIA Novosti, Danone aimed to retain the ability to purchase back shares in its Russian firm, along with a stake of up to 25% of its capital and a position on the board. By February, the company had selected about 20 possible buyers for its Russian assets. In June, it was reported that the agreement would be completed in the first half of 2024, allegedly because Danone was delaying the process, the news agency said.
Following the announcement of the decree, Danone said in a statement that it was investigating the issue and that the Kremlin’s decision would have no effect on its financial estimate for 2023. The company also stated that it was “preparing to take all necessary measures to protect its rights as shareholders of Danone Russia, and the continuity of the operations of the business.”
Carlsberg Group
Carlsberg Group claimed in March that it would no longer invest in Russian businesses. It announced in June that it had agreed to sell its Russian assets to an unnamed buyer for an undisclosed amount. The Danish company refused to offer any information about the transaction, claiming the necessity to “ensure that the approval processes go as smoothly as possible” with Russian authorities.
Baltika Breweries was one of Russia’s largest beer manufacturers. According to the Russian business daily Kommersant, all major competitors in the Russian beer industry, including Carlsberg Group, Dutch Heineken, and Belgian Anheuser-Busch InBev, were cutting production in Russia in 2022, while local companies were booming.
According to a statement from Carlsberg on Sunday, “Following the presidential decree, the prospects for this sales process are now highly uncertain.” “The Carlsberg Group has not received any official information from the Russian Authorities regarding the presidential decree or the consequences for Baltika Breweries,” the statement added.
Despite the unprecedented barrage of sanctions unleashed by the US and its allies against Russia, data published by the Kyiv School of Economics in April shows that fewer than 10% of foreign companies had divested from Russia more than a year after the conflict between Moscow and Kyiv began.