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Unilever to sell Russia business to Arnest amid calls to exit country over Ukraine war

Food Ingredients First 2024-09-19
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Unilever is selling its business and assets in Russia to the Arnest Group, an aerosols and metal packaging manufacturer. It joins a slew of companies that have curtailed operations and sold assets in the country amid sanctions over the war with Ukraine.

The two parties have approached the Kremlin subcommittee on foreign investments and await approval before it can exit Russia. This is a requirement for Western companies shutting up shop ever since Russia invaded Ukraine in February 2022.

While the financial details of the transaction are not public yet, the Financial Times reports that the deal could bring Unilever up to US$500 million. Russian business outlets report that the government has already approved the agreement, citing anonymous sources.

The deal covers Unilever’s subsidiary Unilever Rus LLC, which has the domestic rights to the company’s well-known brands such as Knorr, Axe, Dove and Domestos.

Unilever’s Russia operations

Unilever has continued its operations in Russia until now, which has prompted criticism, as many Western companies have ceased business operations in light of the Russia-Ukraine war.

“We understand why there are calls for Unilever to leave Russia. We also want to be clear that we are not trying to protect or manage our business in Russia. However, for companies like Unilever, which have a significant physical presence in the country, exiting is not straightforward,” the company said in 2023, defending its position in the country.

Unilever also announced stopping all imports and exports of its products into and out of Russia, noting that all media and advertising spend had also ceased. “We have also ceased all capital flows into and out of the country. We continue to supply our everyday food and hygiene products made in Russia to people in the country.”

According to the FMCG giant, its Russian business activities brought in around 1% of the company’s total turnover and net profit. The company at the time had €600 million (US$667 million) of net assets, including four manufacturing sites in Russia.

Kremlin-West relations

Meanwhile, Moscow nclick="updateothersitehits('Articlepage','External','OtherSitelink','Unilever to sell Russia business to Arnest amid calls to exit country over Ukraine war','Unilever to sell Russia business to Arnest amid calls to exit country over Ukraine war','343128','https://www.foodingredientsfirst.com/news/russia-rejects-ab-inbevs-joint-venture-sale-to-turkish-brewer-anadolu-efes.html', 'article','Unilever to sell Russia business to Arnest amid calls to exit country over Ukraine war');return no_reload();">blocked Turkish brewer Anadolu Efes’ proposed deal last month to acquire AB InBev’s stake in a US$1.3 billion Russian joint venture.

The deal would have enabled AB InBev, whose brands include Stella Artois and Budweiser, to end operations in the country as relations between the Kremlin and Western nations worsened.

Since the war, the Arnest group has amassed approximately US$1 billion worth of assets. Last year, Heineken nclick="updateothersitehits('Articlepage','External','OtherSitelink','Unilever to sell Russia business to Arnest amid calls to exit country over Ukraine war','Unilever to sell Russia business to Arnest amid calls to exit country over Ukraine war','343128','https://www.foodingredientsfirst.com/news/heineken-completes-exit-from-russia-with-%E2%82%AC300m-in-losses.html', 'article','Unilever to sell Russia business to Arnest amid calls to exit country over Ukraine war');return no_reload();">announced the completion of the transaction to sell its Russia operations to the Arnest Group.

The transaction received all the required approvals and concluded what began in March 2022 to exit Russia, incurring an expected total cumulative loss of €300 million (US$323.6 million).

Meanwhile, in addition to sanctions, fears remain that Russia will continue to seize foreign assets, as it did last year when it took control of Danone’s Russian subsidiaries and Carlsberg’s Baltika Breweries.

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