Danone secures Russia's approval for sale of assets

Danone has moved a step closer to the disposal of its dairy business in Russia after gaining “regulatory approvals” for a deal for the assets.

The France-headquartered dairy giant confirmed on Friday (22 March) the company would incur a loss of €1.2bn ($1.3bn) from the sale of its essential dairy and plant-based (EDP) division assets in Russia.

Danone said it expects to close the transaction with Russian dairy producer Vamin Tatarstan, which is owned by local businessman Mintimer Mingazov, in the “coming weeks”.

EDP accounted for 90% of Danone’s business operations in Russia, the company had said previously, with the remainder in infant formula through its specialised nutrition unit.

Just Food approached Danone to clarify the status of that remaining business in Russia and also to ascertain what assets are included in the EDP sale to Vamin Tatarstan in terms of production plants and brand equity.

However, Danone said via a spokesperson today that it could not comment any further.

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In a statement on Friday, Danone said: “The Russian regulatory approvals required for the disposal of its EDP business in Russia to Vamin R LLC have been obtained.

“Danone launched the transfer process of this business in October 2022. In July 2023, Danone deconsolidated EDP Russia from its accounts after losing the control of the management.”

The closing of the transaction would mark the end of a long-running saga over Danone’s presence in Russia that erupted following Vladimir Putin’s invasion of Ukraine in February 2022.

Early on in the conflict, Danone announced in March of that year it had suspended all investment in Russia but would continue manufacturing from what was understood to be a dozen or so production plants.

In October 2022, Danone said it would get rid of the EDP business in Russia, where it was supplying brands such as Activia yogurt, Nutrilon infant formula and Prostokvashino milk, estimating the associated cost to be €1bn at the time.

The Kremlin then seized Danone’s Russian assets in July last year, putting them under the “temporary management” of government property agency Rosimushchestvo.

That same month, Danone renamed the Activia dairy brand in Russia to AktiBio in what the French giant described as a “localisation” move.

While Danone had essentially lost control of its assets in Russia, the company insisted last July that it remained the “legal owner”.

The ball started rolling toward a sale of Danone’s EDP business in Russia in February when Vamin Tatarstan emerged as a potential buyer.

Putin then reportedly removed the state control over the assets earlier this month, paving the way for a sale to proceed.

More details on the disposal may come to light when Danone issues its first-quarter results for fiscal 2024 on 18 April.

In February, Danone announced its 2023 sales revenue rose 7% to €27.62bn on a like-for-like basis from a year earlier but net income dropped 8.1% to €881m.

It reported recurring earnings per share of €3.54, which was “offset by a negative scope effect of -4.5%, mainly resulting from the deconsolidation of our EDP business in Russia”, CFO Juergen Esser told analysts.

“What we have been doing on Russia with the deconsolidation in July is to impair the totality of the assets we had in the balance sheet, around €700m,” he said.