The consumer goods group has been trying to part with its Russian business since last April.
(Photo: Getty Images; Per-Anders Pettersson)
Riga, Dusseldorf The Persil and Pril manufacturer Henkel is apparently about to part with its Russian business. A consortium of investors should take over this, the Russian business newspaper “Vedomosti” reported on Tuesday. A Henkel representative told the newspaper that the sale was in the final stages.
When asked, Henkel did not want to comment on “any rumors about possible buyers or transaction details”. But: “It is correct that we are in advanced talks about the sale of our activities in Russia,” said a spokesman. So far no contract has been signed.
With the sale, Henkel would end a tiresome chapter. The group announced last April that it would withdraw from the country due to the great public pressure. Before the Russian invasion of Ukraine, the consumer goods giant was invested more heavily than any other Dax company.
The Düsseldorf-based company achieved five percent of its group turnover in Russia, around one billion euros, and employed 2,500 people in eleven plants. Henkel was active there with its consumer goods and adhesives business.
With this size of business, it was considered likely that there would be multiple buyers. Recently there have been increasing indications that it will be Russian investors. According to Vedomosti, the buyers are said to be major shareholders in the drug manufacturer Pharmstandard and the investment company Kismet Capital, as well as the founders of the private equity company Elbrus.
Government commission must approve sales
The managing director of Pharmstandard is the billionaire Wiktor Charitonin, who is, among other things, the main owner of the Nürburgring and who is said to have recently considered the purchase of Hahn Airport. The Russian billionaire Roman Abramovich, who held 17 percent of the shares until 2008, was also involved in the founding of Pharmstandard.
Kismet Capital, a Moscow-based private equity firm, invests in the technology, media and telecommunications sectors. The founder and boss is the prominent investor Ivan Tawrin. And Elbrus manages more than $1.5 billion with its funds focused on Russia and the countries of the former Soviet Union.
According to two Vedomosti sources, the Pharmstandard shareholders are to become majority owners of Henkel’s Russian activities. As a result, the parties have already received government commission approval to complete the deal.
526
Million Euros
of assets Henkel reports in its annual report for Russia.
This was specially set up last September and must approve transfers of shares in certain companies involving buyers or sellers from so-called “unfriendly countries”. Germany is also one of the “unfriendly states” from the Russian point of view. Volkswagen also has problems with finally withdrawing from Russia.
The authorities are making it increasingly difficult for Western companies to sell their assets locally and withdraw from the country. A decision was only published on Monday, according to which companies must from now on make a direct payment to the state when exiting Russia.
Henkel apparently has to accept significant losses in the sale
Henkel actually wanted to have stopped its activities in Russia by the end of 2022. Because that didn’t work, an exit was then targeted in the current quarter – i.e. by the end of this week.
Apparently, Henkel would only get rid of the business with major financial losses. The group had already written off around 200 million euros on it in 2022. Henkel has discontinued some activities, especially in the industrial adhesives business, because the group fears that industrial knowledge will be lost to competitors or that these products will be used for military activities.
In its annual report, Henkel reports assets in Russia of 526 million euros. CFO Marco Swoboda recently said it was questionable whether sales proceeds of this magnitude could be achieved.
The group has already written off around 200 million euros on its Russian business.
(Photo: AFP/Getty Images)
According to “Vedomosti”, the purchase price should not be higher than 150 million euros. Henkel did not comment on this information. If companies from “unfriendly countries” want to leave Russia, a Russian appraiser assesses the value of the company. For the purchase price, 50, sometimes even 70 percent are deducted.
The low sum can also be explained by the fact that Henkel is said to have secured a buyback option, the newspaper reports. It is also said in company circles that Henkel wanted to contractually record such a possibility.
The company is the only major consumer goods maker looking to pull out of Russia. The Nivea manufacturer Beiersdorf, for example, is continuing its activities there.
More: Persil manufacturers are struggling with high costs: Henkel profits plummet by 23 percent