Why Aven and Fridman decided to withdraw from the shareholders of Alfa-Bank

Mikhail Fridman and Petr Aven will cease to be shareholders Alfa Bank – the largest private Russian bank, founded by a consortium of Alfa Group in the 1990s. The upcoming deal was confirmed to Vedomosti by a representative of the credit institution. The billionaires will transfer their shares to Andrey Kosogov, a business partner in Alfa.

Now Kosogov has 41% of the Luxembourg ABH Holdings SA, which controls Alfa-Bank. Aven holds 12.4%, Fridman – 32.9%. As a result of the deal, Kosogov will become the controlling shareholder with an 86.3% stake.

Before the special operation, he owned 3.7% of ABH Holdings, but in March 2022, two other founders of Alfa Group, German Khan (21%) and Alexei Kuzmichev (16.3%), transferred their shares to him. Another 9.9% is owned by UniCredit SpA and 3.87% by the Mark Foundation for Cancer Research.

On March 9, the Financial Times wrote about the deal, specifying that it would require the approval of regulators – the Bank of Russia and, possibly, the US and EU authorities responsible for the sanctions policy. A representative of Alfa-Bank said that the approval of foreign regulators may not be needed: this is due to the fact that “neither Andrei Kosogov nor the seller are under sanctions.”

According to the law on banks, the acquisition by an individual of more than 20% requires the prior consent of the Bank of Russia. In 2023, transactions with shares and rights in relation to financial organizations can be made without the prior consent of the antimonopoly authority, but with subsequent notification of the FAS Russia about their implementation, recalled the representative of the department. Vedomosti sent a request to the Central Bank.

Fridman and Aven are not in Russia, and a year ago they came under blocking sanctions from the European Union and Great Britain. After that, both resigned from the board of directors of the bank and left the LetterOne investment group. Fridman also left the board of directors of VEON (still owns VimpelCom) and the supervisory board of the retailer. X5 group. Later, blocking sanctions also overtook Alfa-Bank – last spring they were introduced by the United States and Great Britain, and in February of this year by the European Union.

The main result of the transaction will be that the bank will be owned by “a Russian citizen and one of the founders of Alfa Group” Kosogov, the bank representative specified. According to the interlocutor of Vedomosti, close to Alfa Group, the deal will allow the bank to “move” to Russian jurisdiction.

Fridman and Aven intend to sell their shares for $2.3 billion (178 billion rubles), the Financial Times reported. According to the latest published data on the website of the Central Bank, the capital of the bank as of February 1, 2022 amounted to 769 billion rubles. or just over $10 billion at the current exchange rate. Based on this figure, the current price for the shares of Aven and Fridman is almost two times lower than in February ($4.5 billion).

After the start of the special operation, the bank does not disclose financial results.

It is too early to talk about its completion, the bank representative added: the parties need to go through a number of corporate and legal procedures.

What’s going on with Alpha Group

Alfa Group has never had legal registration, it manages various businesses in the field of financial services (ABH Holdings, “Alpha insurance”, Alfa Capital Management Company, Alfa Asset Management SA), investments (investment A1), retail trade (X5 Group), as well as water supply (“Rosvodokanal”), etc.

Fridman, Aven and Kosogov lost control of the Ukrainian Alfa-Bank Ukraine last spring – it was transferred to a special committee of four newly appointed independent directors-citizens of Ukraine and renamed Sense. Alfa-Bank, due to US sanctions, lost its “daughter” in Kazakhstan – it was also blacklisted, and its management immediately announced plans to change ownership. A month later, Kazakhstani Alfa-Bank acquired the local player CenterCredit, renaming it Eco Center Bank. As a result, in the summer the United States excluded the bank from the sanctions lists.

Due to sanctions, the group lost control of the Borjomi mineral water producer a year ago, giving away 7.7% to the Georgian government for free.

Fridman and Aven, according to the latest data, also have shares in Alfastrakhovanie JSC and Alfa Capital Management LLC.

Kosogov, in turn, was a member of the board of directors of the Alfastrakhovanie group, Alfa-Bank, ABH Holdings SA and chairman of the board of directors of Alfa Capital Management Company. Currently, there is no up-to-date information on the websites of companies. The Criminal Code declined to comment, the representative of the insurer confirmed the relevance of the data.

Regulator Resolution

Following the formal logic of presidential decrees on a special procedure for making transactions, transactions by Russian persons are not subject to approval by the government commission, says Maria Lyubimova, head of the Legal Support for Foreign Economic Activity practice at the Regionservis Bar Association. On the other hand, Aven and Friedman own shares through a Luxembourg company, which in some cases may lead to the need to obtain the consent of the government commission.

Even if a foreign company is a party to the transaction, but at the same time it meets the criteria for a CFC (controlled foreign company), then the consent of the government commission can be avoided, adds Sergey Ermolenko, partner at the law firm Orlova\Ermolenko. At the same time, the acquisition of such large blocks of shares in the bank in any case will require the consent of the Central Bank and the Federal Antimonopoly Service of Russia, he clarifies: it may take about 4-6 weeks to receive them.

As for the consent of foreign regulators, it is important to understand that it does not always depend on whether the parties are under sanctions or not, Yermolenko continues. A number of European jurisdictions provide for the need to coordinate with the local regulator a transaction for the sale of Russian assets.

The deal is being made with the shares of the Luxembourg company – the unfreezing of shares owned by Fridman and Aven will require permission from the European Commission, says Ekaterina Makeeva, partner and head of the sanctions practice at A-PRO.

Get rid of sanctions

The main motivation of Friedman and Aven is the lifting of sanctions. A publication in the Official Journal of the EU claimed that Aven “benefited from his connections in power” and Friedman “managed to forge strong ties with the administration”. In May 2022, both businessmen challenged EU sanctions in court.

The very idea of ​​sanctions is political in nature, but the procedure for their application is nevertheless clothed in a legal form, Yermolenko notes. There are examples from which it follows that sanctions do not have the goal of “punishing” a person for life – this allows us to talk about the possible lifting of restrictions in cases where the circumstances that justified their introduction have disappeared. For example, in March, the EU court annulled sanctions against Violetta Prigozhina, the mother of the founder of PMC Wagner, businessman Yevgeny Prigozhin. The court substantiated its decision by the fact that the presence of only one relationship is not enough. Prigozhina has also not owned Concord Management and Consulting since 2017, although she owned part of the shares – this was one of the grounds for imposing sanctions against her in February 2022.

Quite likely, exit from the Russian business will be decisive for Aven and Fridman, Yermolenko believes. But withdrawal from the package is unlikely to become an unconditional basis for exemption from sanctions, Makeeva notes – it will be necessary to convince the court that there is no support for the “regime”.

For Alfa-Bank, in terms of sanctions restrictions, it is unlikely that anything will change, Yermolenko continues: given its scale and impact on the Russian banking system, the bank will remain under sanctions.

The other day, Western media, as well as the former editor-in-chief of Ekho Moskvy, Alexei Venediktov (recognized as a foreign agent in Russia), wrote that a number of Russian public figures sent letters to the EU leadership with a request to lift sanctions against Fridman. Among the signatories are the editor-in-chief of Novaya Gazeta and Nobel Prize winner Dmitry Muratov, journalist Leonid Parfyonov, the founder of the Dozhd TV channel (recognized as a foreign agent by the media) Natalia Sindeeva (recognized as a foreign agent), and others.