Investors gathered for yogurt

Control over Danone’s dairy products and plant-based drinks business in Russia has attracted the attention of a number of strategic investors. Among the contenders unofficially named large producers of milk “Ekoniva”, Agrocomplex named after. N. I. Tkachev and Rumelko Vladimir Lisin, as well as Rusagro and Cherkizovo. A large number of participants can increase the price of an asset, experts say.

Rusagro Group, Cherkizovo Group, Chernogolovka Group, Ekoniva Group, Rumelko, Agrocomplex im. N. I. Tkachev and AFK Sistema. This was told to Kommersant by a source among product manufacturers familiar with the sale. Another interlocutor of Kommersant who knows about the deal noted that the list may be close to reality. At the first stage, potential buyers were selected by Rothschild & Co, which advises Danone in the transaction, the Kommersant source said.

Danone announced the transfer control over the business of dairy products and vegetable drinks in Russia in October 2022. The deal may include 13 factories producing traditional dairy products, yoghurts, and desserts.

According to Kommersant’s interlocutors, of all Danone brands, only local brands can leave in the Russian Federation – Prostokvashino, Rastishka, Tyoma.

In January-September 2022, Danone’s global revenue grew by 14.9%, to €20.7 billion. The sold business in Russia accounted for about 5%.

Last week Kommersant’s sources saidthat Danone is considering a sale of 75% but less than 100%, plans to retain its board seat and wants to include a buyback option in the deal. Danone told Kommersant that the process is ongoing, refusing to provide details. Rothschild & Co did not provide comment.

Some of these interested parties are already working in the dairy industry. Stefan Duerr’s Ekoniva produced 1.19 million tons of raw milk in 2022, the Agrocomplex of the family of the ex-Head of the Ministry of Agriculture Alexander Tkachev – 338 thousand tons, and the Steppe agricultural holding, which is part of AFK Sistema, planned to produce more than 140 thousand tons. Rumelko, the main owner of NLMK, Vladimir Lisin (ranks first in the Forbes rating with a fortune of $18.4 billion), is building dairy complexes with a capacity of 180,000 tons.

Founded by ex-senator Vadim Moshkovich, Rusagro produces cheese, butter and other dairy products at two sites. And Cherkizovo, a large manufacturer of meat products, and Chernogolovka, which produces soft drinks, snacks and sweets, do not have assets in the dairy industry. A Kommersant source close to the latter said that the group had no interest in Danone. AFK Sistema and EkoNiva declined to comment. Cherkizovo noted that they are ready to consider any proposals that may be of interest from the point of view of business development, and do not comment on potential M&A. In Rusagro, Rumelko, Agrocomplex them. N. I. Tkacheva and Chernogolovka did not provide any comments.

According to Kommersant’s interlocutors, Danone is not interested in a quick exit from the Russian Federation, but rather wants to retain the opportunity to return under suitable conditions. This factor will also be taken into account when selecting buyers, Kommersant sources say.

According to one of them, the Ministry of Agriculture, whose representative will participate in the consideration of the transaction at the government commission, sees the strategic investor as the best buyer. The Ministry of Agriculture did not answer Kommersant.

Dmitry Gabyshev, managing director of Peregrine Capital, notes that a large number of participants can significantly increase the price of an asset. Marat Ibragimov, a senior analyst at Gazprombank, believes that of these companies, Ekoniva may be the best option for Danone. Through the transaction, the group will be able to expand its presence in the most profitable segment of the dairy market, obtain synergies with the core business and strengthen long-term positions, remaining on the winning side, even if it has to part with the asset, the analyst says. For Danone, Mr. Ibragimov believes, the transfer of control to a competitor is unlikely to carry any risks, since technologies in the industry as a whole are standard, and brands are the main value. At the same time, a Kommersant source familiar with the deal clarifies that “the choice of an investor not from the dairy industry will help eliminate a possible conflict of interest.”

Anatoly Kostyrev