Dive Brief:
- Russia seized local assets from Danone, creating complications for the dairy giant as it looks to exit the country.
- President Vladimir Putin signed a decree Sunday to temporarily transfer control of Danone’s local subsidiary to Russia’s Federal Agency for State Property Management. Russia also took over assets from Danish brewing company Carlsberg.
- Danone said in a statement it “is investigating the situation.” This is the second time Russia has seized assets from Western companies since unveiling an April decree that allows the state to take operational control of businesses from “unfriendly” states.
Dive Insight:
Companies in the U.S. and Europe have moved to minimize risk and offload their operations in Russia, but the country hasn’t made it easy.
In December, the country ruled that companies from “unfriendly” states must sell their local assets at a 50% discount based on a valuation determined by Russia. Sellers must then pay an exit tax for one to two years, or commit to an upfront fee worth 10% of the sale price.
Many companies have prepared to sell off their Russian assets at a loss. Danone began the process to sell its business last October, saying the transaction could lead to a write off of 1 billion euros, or around $954 million using exchange rates from the time of the announcement.
With Russia seizing assets,a sell-off remains up in the air. Danone said in a statement Sunday that its plan to exit Russia was “progressing according to the expected schedule,” and that it is now “preparing to take all necessary measures” to wrest back control.
Carlsberg’s sale of its assets in Russia is now “highly uncertain,” the company said in a statement. An agreement to sell its Baltika Breweries was signed June 23, and Carlsberg said it “finds this development unexpected” given it has operated in Russia in accordance with local regulation.
Over 1,000 companies have announced they would curtail operations in Russia since the country invaded Ukraine last February, according to the Yale School of Management. Many food companies — including Cargill and ADM — have scaled down some operations, but have not left the country.