Shares in the Agroterra agricultural holding were transferred to state management

The American investment company NCH Capital lost control over a Russian asset – the Agroterra agricultural holding, which manages 265 thousand hectares of agricultural land in several regions. By decree of President Vladimir Putin, shares in the holding structures were transferred to the temporary management of the Federal Property Management Agency. Lawyers believe that the owner of Agroterra could step aside from management, and experts warn that a change in management will not be easy, given the start of spring sowing and the size of the land bank.

Russian President Vladimir Putin transferred shares of the Dutch Agroterra Holdings BV, NAP Finance BV, and Cyprus Agro Investments Ltd. and Agro Holdings Ltd. in the structures of the agricultural holding “Agroterra” to the temporary management of the Federal Property Management Agency. The corresponding decree was published on April 8. Agroterra told Kommersant that they have not yet received official information regarding the decree and continue to work as before. The Federal Property Management Agency did not respond promptly.

Agroterra is part of the portfolio of the American investment company NCH Capital. According to Forbes, NCH Capital was founded by a US citizen with Ukrainian roots, George Rohr, whose structures began investing in agricultural land in Ukraine, Russia, Bulgaria, Romania and Kazakhstan in the 1990s.

According to BEFL data as of May 2023, Agroterra controlled 265 thousand hectares, which corresponds to 18th place among Russian landowners. According to our own data, the farms are located in the Kursk, Lipetsk, Penza, Ryazan, Tambov and Tula regions, where soybeans, wheat, sugar beets, sunflowers, and rapeseed are grown. In addition to Agroterra, NCH Capital owns the Ukrainian agricultural holding Agroprosperis with about 400 thousand hectares of agricultural land. NCH ​​Capital did not provide comment.

“Agroterra” is the first example of the transfer of agricultural assets to the temporary management of the Federal Property Management Agency.

In the food market, such a procedure was introduced in July 2023 in relation to the shares of the French dairy producer Danone and the brewing group Carlsberg Group in Russian assets. Then the presidential decree was preceded by announcements from companies about reducing their presence in the Russian Federation. Danone announced the transfer of control over the business of dairy products and plant-based drinks, and Carlsberg Group announced the choice of an investor for the Baltika brewing company. In March 2024, the transfer of Danone’s shares to the Federal Property Management Agency was canceled, after which the French company announced that it had received permission to sell its business in the Russian Federation to Vamin R LLC. Carlsberg’s share in Baltika remains under the management of the Federal Property Management Agency, and the Russian company continues to sue the foreign owner (see “Kommersant” dated March 21).

Partner at the law firm Rustam Kurmaev and Partners, Dmitry Kletochkin, believes that in the case of Agroterra, the reason for transferring shares to the management of the Federal Property Management Agency could be the removal of NCH Capital from management or a decrease in management efficiency due to sanctions. A Kommersant source on the market said that the owners of Agroterra have recently received offers to sell the business. According to another Kommersant interlocutor, before the start of Russian military operations in Ukraine, NCH Capital estimated the value of Agroterra at approximately $1 billion (RUB 92.58 billion at the Central Bank exchange rate as of April 4, 2024).

As Mr. Kletochkin notes, the temporary manager of the shares will probably want to appoint his own manager to control the asset. It is possible, he adds, that unprofitable deals will be challenged, and the former management may face claims for damages, if any. According to the lawyer, theoretically NCH Capital can challenge the presidential decree, but in practice the chances of success are zero.

Sovecon director Andrei Sizov points out that changing the management of an agricultural holding as a whole is a complex process, especially when it comes to land plots of such an area and given the start of spring sowing work. According to him, under an optimistic scenario and the retention of key management personnel, Agroterra can continue to operate approximately as before. And in the worst case, with the outflow of top management, the business may experience difficulties, the expert points out.

Anatoly Kostyrev