Danone aims to sell Russian assets to EkoNiva

It has been reported that Danone’s price tag on its Russian assets is around €1 billion. However, the actual price discussed with the EkoNiva could be as low as €360 million, Prime reported.

EkoNiva’s parent company, Ekosem Agrar AG, is registered in Germany, meaning the transaction must involve an intermediary. A possible option for Danone is to register a subsidiary in Dubai, UAE (considered to have fewer ‘obstacles’ for the company), through which the company could sell an 80% stake. The French company intends to preserve the remaining share for the time being.

Permission needed

The takeover, however, is likely to face certain impediments. Danone runs 18 plants and factories across the country and is considered a strategically important business by Russian authorities. Under a 2022 presidential decree, all transactions involving investors from “unfriendly” countries must seek permission from a specially established government commission.

Prime assumed, referring to local analysts, that the Russian Finance Ministry is unlikely to give a positive conclusion for the takeover, meaning the deal has a relatively low chance of happening.

Benefitting from the sale

Anna Builakova, an analyst from the Russian think tank Finam, expressed confidence that EkoNiva could undoubtedly benefit from the deal – from increased production and combining administrative functions of different assets. She added that, in 2022, Danone generated a net revenue of €1.66 billion in Russia, which means that the declared purchase price of €360 million is low by market standards.

Olga Romanova, managing partner and lawyer at Ratum Law Group, admitted that getting permission for the takeover would not be easy. The public profile of the purchaser could play a role here. Stefan Duerr, president of EkoNiva, received Russian citizenship through a special president degree for his role in developing Russian agriculture. He also has a certain influence internationally, Romanova added.

Over the past year, the Russian press reported that several agricultural companies were eyeing the takeover of Danone in the country. Among the main contenders named are meat producers Cherkizovo and RusAgro, Tkachev’s Agricultural Complex, as well as big companies outside the food sector, like AFK Systema.