Danone is in the process of divesting its business in Russia, whose control has been held by the Russian government agency Rosimushestvo since July 2023, reports the Financial Times.

A shrinking market

The Russian company Vamin Tatarstan is set to acquire Danone's business in Russia for 17.7 billion rubles (186 million USD). Danone will receive 10 billion rubles (105 million USD) for its equity, while the remaining amount will be allocated to debt servicing within the Russian unit.

Following the seizure by Russian authorities, Danone recorded a substantial impairment of approximately 700 million euros (757 million USD) for its operations in Russia, with previous warnings suggesting a possible write-down of up to 1 billion euros (1.08 billion USD) in case of a single-unit sale.

Danone's press office said that since the seizure, Danone has remained the legal owner of the assets, although the company lost management control of the business and, consequently, fully deconsolidated its Russian EDP entities since July 2023.

"Since the announcement, our focus has been on ensuring the safety of our people while protecting Danone's assets and rights. Given the uncertainty and volatility of the situation, we cannot comment further," Danone added.

Multiple options

A source from the Russian dairy industry, who wished to remain anonymous, told a local publication, Agroinvestor, that the government agency was designated as an interim shareholder of Danone's assets, so legally, the sale is still possible.

There may be multiple sale options – either entirely to a specialized player like Vamin or partially, the source said.

"If the deal is finalized and receives the green light from the Russian Ministry of Agriculture, Vamin will have one of the best dairy assets in the country, with high-quality equipment, brands, and a professional team," the source added.

Ayrat Mukhamadeev, director of a newly created company owned by Vamin Tatarstan, said that the transaction price represents a 56% discount from the market value of the business, according to an independent assessment cited by the company, as reported by the Financial Times.

Moscow is demanding a discount of at least 50% on all foreign transactions after consultants selected by the Russian government assessed the business.

Mukhamadeev mentioned that to ensure the "continuity" of its former Russian business, Danone has agreed to provide support until the end of next year's July to maintain the "high quality of products that Russian consumers are accustomed to." (Photo: Freepik)