Russia approves USD 322 million management buyout of Baltika

Russia | Carlsberg has finalised a deal to sell its Russian assets, including Baltika Breweries, to two senior employees of the company, Reuters reported on 2 December. The day before, Russia’s President Putin had signed a decree which ended state control of the business. The deal, valued at RUB 34 billion (USD 322 million), comes after months of uncertainty following Moscow’s seizure of Baltika in July 2023.

“Considering the circumstances, we believe it is the best achievable outcome for our employees, shareholders, and the continued business,” Carlsberg’s CEO Jacob Aarup-Andersen said. He added that the deal resolves multiple lawsuits and intellectual property disputes related to Baltika Breweries.

A pricey exit

The rock bottom transaction price reflects Russia’s tightened rules for foreign exits. Per reports, Russia now requires from a seller a significant discount of 60 percent and an “exit tax” of 35 percent. Carlsberg's net assets in Russia were valued by independent Russian analysts at a minimum of USD 5 billion in 2024, indicating a steep markdown.

The number two brewer in Russia, with a market share of perhaps 27 percent, has eight breweries and employs more than 8 000 people. It produced an estimated 21 million hl beer in 2023.

In 2023, Baltika’s revenue was nearly RUB 110 billion (USD 1.1 billion) and its gross profit RUB 47 billion. However, it booked a pre-tax loss of RUB 26 billion, compared with a pre-tax profit of RUB 12 billion in 2022, the Russian news agency Tass reported in April. Tass put Carlsberg’s accumulated losses from its Russia exit at USD 6 billion.

The new owner

The assets will be transferred to VG Invest, a company co-owned by Baltika’s vice president Yegor Guselnikov and Alexander Tolmachev, another Baltika executive. The two will take over Baltika’s management.

The Russian newspaper Wedomosti claims that another investor in VG Invest is Baltika’s president, Taimuraz Bolloyev. He headed the brewer from 1991 until 2004 and was reappointed in 2023 after the seizure of Baltika. In June 2024, Mr Bolloyev was put on the EU’s sanctions list.

Hindsight is easier than foresight

Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center in Berlin, commented to the Financial Times newspaper: “You can only be happy that Carlsberg is not going to leave with its pockets completely empty, as it could have. But it is obvious that companies that left the Russian market at the very start of the war [in Ukraine] have won, because they managed to do it without dramatic losses like this.”

As part of the transaction, Baltika’s stakes in Carlsberg Azerbaijan and Carlsberg Kazakhstan will be exchanged for Carlsberg-owned Hoppy Union, valued at RUB 2 billion. No cash will change hands for this portion of the deal.

The sale follows a tumultuous period for Carlsberg in Russia. In June 2023, the company announced plans to sell its Russian operations, but the government quickly assumed control. Some months later, two former executives were detained over accusations of transferring intellectual property rights, which Carlsberg called “fake”. The criminal prosecution against one executive was terminated by the Vyborg District Court of St. Petersburg in November 2023.

Baltika’s external management, appointed by Russian authorities during the temporary seizure, will now step down.