External management has been canceled at Danone’s Russian assets

The transfer to the Federal Property Management Agency of the French company’s shares in the Russian assets of the dairy products manufacturer Danone, introduced in July 2023, was canceled by a decree of President Vladimir Putin. Lawyers associate the measure with the approval of a transaction to sell the business to a suitable buyer, as well as with the desire to avoid a claim from the company in international investment arbitration.

Russian President Vladimir Putin canceled the transfer of shares in the Russian structures of the large dairy products manufacturer Danone to temporary management of the Federal Property Management Agency. Decree published March 13.

The Federal Property Management Agency received temporary management of shares in the Russian structures of Danone, owned by the French Produits Laitiers Frais Est Europe, on July 16, 2023. Subsequently, the company was headed by the former deputy chairman of the Chechen government and ex-minister of agriculture of the republic Yakub Zakriev, and the business was renamed Health & Nutrition (H&N). JSC Danone Russia changed its name to JSC H&N, and LLC Danone Trade to LLC H&N Trade.

Some products have also been renamed. Actimel began to be produced under the Actimuno brand, and Alpro drinks changed their name to Planto. In addition, H&N’s portfolio includes the brands “Prostokvashino”, “Aktibio”, “Tema”, “Rastishka”, etc. H&N declined to comment. Danone did not respond promptly.

At the end of February 2024, the newspaper Financial Times (FT) with reference to its own sources and documents, reported that Danone could sell the Russian business to the Vamin company from Tatarstan, which belongs to Mintimer Mingazov, who joined the board of directors of the Russian structure after it was headed by Yakub Zakriev. According to FT, the director of the company owned by Vamin, Airat Mukhamadeev, in a letter to the head of the Ministry of Agriculture Dmitry Patrushev, reported that Vamin is ready to purchase the Russian assets of Danone for 17.7 billion rubles, of which 7.7 billion rubles. will go towards paying off the debt. The amount takes into account a 55 percent discount to the value of assets, the FT wrote.

Kommersant’s sources in the market associate the presidential decree with the possible approval of a deal to sell Danone’s Russian assets.

By transferring it to external management, the Russian authorities probably strengthened their negotiating position and reached some kind of compromise, believes Dmitry Kletochkin, partner at Rustam Kurmaev and Partners.

Partner at the NSP law office, Ilya Rachkov, notes that in addition to the impending deal, the decision could have been influenced by Russia’s reluctance to receive a claim from Danone in international investment arbitration for the de facto expropriation of assets, as Fortum did and Uniper is threatening to do. He adds that transferring such significant assets into private hands is the right step. Kommersant’s interlocutor at the market, however, believes that the sale could also negatively affect the quality of business management.

Anatoly Kostyrev