Mondi and International Paper sold their assets in Russia

Foreign investors have sold their last two large forestry assets in Russia. The British Mondi sold it for 80 billion rubles at a significant discount. its plant in Syktyvkar, the buyer was the non-core Sezar Group. The American International Paper sold 50% of the Ilim group to Russian co-owners for $484 million, receiving less than it paid for the share in 2007. The low price of assets is explained both by the requirements of the Russian authorities and the difficult economic situation of the industry in the country after the closure of the key European market.

British paper and paper packaging manufacturer Mondi Plc reported on signing an agreement with Cesar Invest, a structure of the development company Sezar Group, on the sale of its last and largest asset in Russia – Mondi Syktyvkar. According to the Unified State Register of Legal Entities, the main beneficiary of Sezar Group is Isai Zakharyaev.

The transaction amount was 80 billion rubles. (€775 million at current exchange rates).

Mondi will receive funds from the sale of forestry complex in six monthly tranches, the first by the end of September 2023, three more by the end of December (RUB 13.5 billion each). The last 26 billion rubles. will be paid in two equal tranches upon closing of the transaction and will be secured by a letter of credit. The parties have already received permission for the transaction from the FAS and the Legal Commission for Foreign Investments.

Mondi Syktyvkar LPK is a large producer of pulp and paper products with a capacity of about 1.2 million tons per year. The main products are office, offset and newsprint paper, as well as containerboard and dry market pulp. The plant’s revenue for 2022 is 78 billion rubles. (growth by 9%), net profit – 22.5 billion rubles. (an increase of 18%).

Its other smaller assets are Mondi Pereslavl LLC (Yaroslavl region, flexible packaging), Mondi Aramil LLC (Sverdlovsk region, the only plant in the Russian Federation with a full production cycle of flexible polymer packaging) and Mondi Lebedyan LLC (Lipetsk region, corrugated cardboard packaging) – the British holding sold it to Gotek for €30.4 million.

Mondi initially planned to sell the plant in Syktyvkar for much more – for 95 billion rubles. investment company Augment Investments Limited, associated with Viktor Kharitonin’s Pharmstandard.

But the companies were unable to obtain the necessary permits from the Russian government, and Mondi pulled out of the deal in June 2023. Russian authorities, as a rule, require a discount of at least 50% to the market price when investors leave unfriendly countries.

Also on September 18, Russian beneficiaries of Ilim Zakhar Smushkin and Boris Zingarevich you bought American International Paper has the remaining 50% of Ilim SA, the parent company of the Ilim group, thereby consolidating the controlling stake of the holding (96.37%).

Ilim’s production volume in 2022 amounted to 3.6 million tons; in 2024, due to the launch of new capacities, it should increase to 4.2–4.3 million tons. According to Ilim, “the deal passed all necessary approvals and officially completed.”

International Paper reported that it received $484 million for half of the Russian asset. The full value of Ilim is estimated at $3.5 billion based on a multiplier of 3.1 to EBITDA at the end of 2022, the deal took into account net debt of $2.45 billion. International Paper received a share in Ilim SA in 2007 for $650 million. The company also directly owned 2.39% of Ilim shares, which were previously sold for $24 million.

The traditionally export-oriented Russian timber industry has suffered significantly from Western sanctions, especially due to the European embargo on the import of Russian lumber, plywood, paper, cardboard and pulp. Also, the lack of European equipment may affect the large-scale capacity expansion program that major industry players began in 2019–2021.

Director of Roslesinforg Pavel Chashchin believesthat the departure of Western companies was not a serious blow to the domestic timber industry. He has no doubt that Mondi Syktyvkar LPK will continue to operate. He also called the sale of half of the Ilim group to Russian shareholders “a logical, natural outcome.” The WhatWood agency calls both assets, in which foreign shareholders have invested significant funds, unconditionally promising.

Olga Mordyushenko