BAT’s assets in Russia were transferred to a company from Abu Dhabi

The Russian division of British American Tobacco (BAT; brands Kent, Rothmans, Dunhill and others), which ranks third in the Russian Federation among cigarette suppliers, has been transferred to a company from Abu Dhabi. It is owned by three former top managers of BAT and two people who may be associated with the distributor of SNS Group of Companies. The UAE structure will provide access to foreign banks and could facilitate global trade, experts say.

The former Russian structures of the British tobacco concern BAT – JSC BAT-SPb and JSC MUMT – were transferred to BFI Holding from Abu Dhabi, follows from the Unified State Register of Legal Entities. According to the Abu Dhabi Global Market (ADGM) registry, BFI Holding is owned by Faruk Yener, Oleg Barvin, Elena Zavarzina, Andrey Osavolyuk and Sergey Kudinov. Faruk Yener was the general director of BAT for Russia, Turkey, the Caucasus, Central Asia and Belarus, Oleg Barvin headed the legal department, and Elena Zavarzina’s position on LinkedIn is listed as director of marketing for BAT in the Russian Federation.

Messrs. Osavolyuk and Kudinov may be associated with the distributor of BAT in Russia, GC SNS. According to SPARK, Andrey Osavolyuk was a co-owner of the supplier of Fresh Bar, E-ON, Tornado Energy drinks “Global Function Drinks Rus”, which are included in the SNS portfolio. And Sergey Kudinov headed the structure of the SNS Center group, which ceased operations in 2018. The shares of the founders of BFI Holding are not disclosed in the ADGM register.

In September 2023, BAT announced the sale of business in Russia and Belarus, including a factory in St. Petersburg, to a consortium of investors led by management, the composition of which was not disclosed. The former BAT structures now operate as the ITMS group, whose portfolio includes Dunhill, Kent, Vogue, Rothmans, Lucky Strike and Java cigarettes, glo tobacco heating systems and Vuse disposable vaporizers. In 2022, BAT occupied 23.6% of the Russian tobacco market, 35.6% was held by JTI (brands Winston, Camel, etc.), 31.1% by Philip Morris (PMI; Marlboro, Parliament).

BAT did not add anything to its earlier statements about the deal. ITMS said that the owner of the group is BFI Holding, a consortium of Russian investors and the company’s top management, “none of whose representatives work at the global BAT.” The SNS said that the group is not involved in the deal. Earlier, Kommersant’s interlocutors named SNS among the candidates for the position of manager of the BAT business in Russia (see Kommersant dated March 11, 2022).

A Kommersant source in the industry says that the presence among the founders of BFI Holding of persons who may be associated with SNA probably indicates the attraction of financial resources for the transaction. The former management of BAT controls ITMS, which will allow BAT to return to ownership of assets when the situation stabilizes, adds Kommersant’s interlocutor. Another Kommersant source in the market points out that ITMS still has all BAT brands in Russia.

Partner in the Better Chance corporate law practice, Artem Tamaev, says that registering a parent company in the UAE is often used when transferring business in the Russian Federation from foreign investors to friendly entities. According to him, the UAE is one of the few foreign jurisdictions accessible to Russian citizens with a flexible and stable legal regime, which also provides access to the foreign banking system. AtLegal co-founder Nikolay Titov names relatively low taxes among the advantages of the UAE. The Emirates has a well-developed infrastructure, which facilitates the logistics of goods through the country, adds Artem Denisov, managing partner of Genesis.

JTI and PMI continue to operate in the Russian market. Rusbrand executive director Alexey Popovichev notes that companies make decisions about presence or departure, including based on the risks associated with sanctions. The restrictions did not affect food products; most global producers remain in the Russian Federation, he points out. The Russian JTI said that after the introduction of sanctions by the US, EU and Japan on some materials for cigarettes as dual-use products, tobacco companies are looking for new suppliers in China, India and other countries.

Anatoly Kostyrev