Russian clock is ticking for Unilever and Nestlé

Unilever and Nestlé are among western companies still operating in Russia, putting them at risk of having their assets seized by the government, according to Barclays.

The bank’s research team understands that a “hit list” of businesses is being drawn up. Those with 4,000 or more employees, revenues exceeding $825m, or assets exceeding $1.65bn are most at risk of nationalisation, the Financial Times reports. 

Context 

• Since December, any company wanting to exit Russia has had to accept a 50% discount to its market value as supplied by the Kremlin, while also making a “voluntary” contribution of up to 10% of the deal price to the government. 
• In July, Russia took control of Danone and Carlsberg’s Russian interests via a presidential decree that said the state would “temporarily” manage shares belonging to Danone Russia and to Baltika, which is owned by Carlsberg – at a time when both were in the process of selling to local buyers.
• But even a successful sale may not be worth much – Heineken recently exited the country completely, having parted with its Russian business for just €1.
• Last month, an FT analysis of annual reports and financial statements suggested that European companies have suffered at least €100bn in direct losses from their Russian operations since the invasion of Ukraine began. 

What it means

As many as 500 western companies are still operating in Russia. All could be targets for nationalisation as Vladimir Putin seeks to simultaneously prevent economic collapse and placate powerful oligarchs, to whom the businesses could be passed on. Jocelyn Spottiswoode, of business intelligence consultancy Alaco, believes buyers in China and India could also be prioritised. 

The risk for Unilever and Nestlé, which continue to operate in Russia and employ thousands of people, is that the “least bad” option – as it was described by Unilever CEO Hein Schumacher – may carry a bigger downside than expected. 

Read more in WARC’s Spotlight series: The impact of the Ukraine War, one year on

Sourced from Financial Times, Guardian, Heineken