First Heineken, now Rosbank: how Western companies have a presence in Russia

The draft law on foreign management in foreign companies that have announced their withdrawal from Russia needs to be completed, government sources told Izvestia. The document was developed in March against the backdrop of big announcements by Western companies to cut jobs in Russia. But in reality, only a small part of the companies has left Russia so far.

Most companies suspended work “until the normalization of the foreign policy situation”. But now, Western owners are negotiating with their business partners and Russian officials about options to resolve the issue. Employees of many Western companies continue to be paid.

Under these circumstances, the government decided to suspend the adoption of the draft law “On external management for the management of the Organization”. Its essence: After the introduction of external management, foreign owners would be prohibited from disposing of the company’s assets, laying off employees, and taking actions necessary for the company’s future operations. It is proposed to transfer the functions of external administration to the state agency VEB.RF for a period of six months. The company will then be sold at auction. If there is no one willing to buy the asset, the government will be the buyer.

Rosbank seems to be able to prevent expropriation. The controlling stake is owned by the French banking group Societe Generale. In early March, the French announced the end of its activities in Russia and the sale of its shares in Rosbank.

On Monday, April 11, it was announced that Vladimir Potanin’s Interros company had purchased a stake in the French banking group in the Russian banking and insurance business. Details of the deal were not disclosed. Previously, in 2006-2011, Rosbank already belonged to Interros, but later a French group took control of the bank.

off Cyprus

Brewing companies Heineken and Carlsberg will also sell their business in Russia to a new owner. Until then, the breweries of these companies will continue to operate. Heineken owns more than 300 brands, including Heineken, Amstel, and more. In Russia, the company also produces beer under the brands Okhota, Three Bears, Bochkarev, Zhigulevskoye and others.

“The concern in all circumstances guarantees that the salaries of all Russian employees will be preserved until the end of 2022,” the company said on March 9.

British tobacco company Imperial Brands (Davidoff, West, Jadé, P&S, Maxim) also plans to transfer management of the Russian division of the business to a local company. His name was not disclosed, but negotiations are already underway. On the territory of Russia, the British owners have two enterprises, and one in Ukraine (work was also stopped there).

Tobacco producer British American Tobacco announced that it first continued its operations in Russia, but then ceased operations. It is represented on the Russian market by cigarette brands BAT, Kent, Rothmans, Vogue, Dunhill, Pall Mall, Lucky Strike, Java Gold. The company said it “started the process of quickly handing over our Russian business.”

On March 17, British developer Raven Property Group announced that it would hand over its business to Russian executives through Cypriot Prestino Investments. The owner and owner of this purchasing company are Russian managers. This will allow the group to continue working as usual and save jobs.

waiting to move

The transfer of business to Russian rulers is not always conflict-free. As Vedomosti reported on April 11, the Russian top managers of the retail chain of Obi construction and household goods stores had a serious conflict with the German holding Obi GmbH, which is the chain’s majority shareholder. The German owner announced that it was ending its activities in Russia from March 8, but the chain stores continued to operate until March 17.

Later, an announcement was made from the Russian owners: Moscow and St. Obi outlets in St. Petersburg will open in a week, and in two weeks – in all other stores. On the same day, however, Obi GmbH published a rebuttal, calling the allegations “speculation”.

It is not yet known what will happen next with Obi’s Russian business. One option is to sell local assets to a third-party buyer. The second – to the top managers of this network. Citing its sources, the newspaper explains that majority shareholder Obi initially planned to buy real money for the asset, but was ready to cede control over the Russian retailer in March for a symbolic euro. Due to the departure of the German top managers from Russia, the parties did not have time to draw up an agreement.

Wargaming (developer of World of Tanks, World of Warships, World of Warplanes and other video games) announced on April 4 that it is leaving Russia and Belarus. The employees of the company were given four months to liquidate the office in Minsk. They promised compensation. There is a choice: dismissal or relocation to Lithuania, Poland and the Czech Republic. However, relocation only applies to “valued employees”. At the same time, Wargaming manages the operational management of game projects in Russia and Belarus in St. Petersburg to Lesta Studio.

tormented by suspicion

It is clear that many Western companies will not want to leave Russia, said Ilya Rachkov, associate professor at MGIMO and partner at the law firm Nektorov, Saveliev and Partners. “Now it is very difficult to leave everything and go,” he said in an interview with socialbites.ca.

According to the lawyer, it is not only difficult from a financial point of view. “And from a psychological point of view, it’s difficult. Many Western companies loved Russia, worked here for many years and spent not only a lot of money, but also a lot of effort. Therefore, many are tormented by suspicions. Sometimes they make contradictory statements, ”she explained. Rachkov.

Foreign business owners in Russia are not only under pressure from the authorities. “Aside from sanctions and official bans, there are also reputational risks from the West. Now everyone is excited, business has to take that into account,” he said.

In his opinion, the most painless option to leave Russia is to sell the company with the possibility of buying it back.

“This is a normal model. The owner of the company sells it to a Russian owner, a Russian company or a local government,” he said.

According to him, such a sale under current conditions will of course not be at the market price, but at a discount. However, the possibility of repurchase under certain conditions is foreseen.

Georgy Ostapkovich, director of the HSE ISSEK Center for Business Studies, is confident that 40% of companies that announce their withdrawal will return and 60% of companies will leave the market. “Everything will depend on geopolitical changes in the next two or three months,” Ostapkovich said.

At the same time, the specialist considers various plans risky to transfer the business to trusted persons or to the high seas. “Normal business, as a rule, does not engage in such maneuvers. “70 percent of such plans are ineffective,” he said.

Alexander Borisov, Chairman of the Consumer Market Development Council of the Russian Chamber of Commerce and Industry, said that Western businesses’ options to withdraw from Russia will partly depend on the Russian division’s share of the company’s global revenue. .

“If the share is 1-5%, you can write a loss and exit this market. If the share rises to 10-15% or more, companies will wait,” he said.

According to him, the situation around Obi “could be a litmus test and an example for other companies,” should the Russian administration oppose the headquarters’ view.