For Alexei Sagal, an industrialist from the Stavropol province in southern Russia, Vladimir Putin’s full-scale invasion of Ukraine has been transformative.
The horse-breeding fanatic has emerged as a key purchaser of property from fleeing western corporations. Final week his group Arnest, which made its cash as a contractor for a few of the world’s largest shopper items teams, agreed to purchase Unilever’s Russian enterprise for €520mn. It beforehand took over the Russian operations of Dutch brewer Heineken, US canning big Ball Company and Swedish cosmetics group Oriflame.
Arnest’s earnings from gross sales doubled from Rbs7.4bn in 2021 ($77mn) to Rbs13.9bn final yr, whereas primary revenue soared about 24 occasions, from Rbs40.6mn to Rbs972.8mn, in accordance with firm disclosures.
Sagal’s speedy rise to prominence illustrates how the warfare has triggered the biggest asset redistribution throughout the nation because the USSR’s collapse, giving rise to a brand new era of capitalists with ties to the state.
“Arnest was comparatively unknown till such time as corporations had been seeking to promote property. It grew to become a daily and profitable bidder,” mentioned one lawyer engaged on western exits. “The mass departure has created a brand new breed of entrepreneur.”
Different businessmen who’ve bought western property embrace Ivan Tavrin, who purchased classifieds web site Avito from Naspers for about $2.4bn in 2022 and German shopper items big Henkel’s Russian property a yr later. Final December the US sanctioned Tavrin, saying he “has turn into one in every of Russia’s largest wartime dealmakers because the starting of Russia’s unlawful warfare towards Ukraine”.
Discovering consumers acceptable to each western regulators and the Kremlin has turn into ever more difficult for corporations seeking to exit Russia.
Multinationals have to hold out thorough due diligence on bidders and generally search approval from their very own watchdogs to make sure they don’t breach western sanctions.
“The listing of these [potential Russian buyers] who match these standards is consistently getting narrower,” mentioned an individual who has suggested on a number of exit offers.
Overseas corporations additionally must adjust to Russia’s ever stricter guidelines, together with agreeing to steep reductions. The larger the deal, the extra probably the Kremlin and federal ministers are more likely to be concerned.
“Solely these favoured by the authorities can get approval for these property. No one will get them by probability,” mentioned Ilya Shumanov, head of Transparency Worldwide’s Russia department.
Exits are more likely to get extra expensive for western corporations, in accordance with two individuals acquainted with the plans, that are designed to maintain sufficient western property as leverage towards confiscations of Russian property overseas.
Measures into account embrace an increase within the obligatory low cost utilized to property — from 50 per cent to 60 per cent — and a rise in taxes, from 15 per cent to 35 per cent. Putin’s approval would even be formally required for offers valued above Rbs50bn, throughout all sectors.
Based in 1971 as a state chemical plant in Sagal’s hometown of Nevinnomyssk in southern Russia, Arnest has one benefit: Sagal has not been sanctioned by western powers.
The businessman can also be near Denis Manturov, Russia’s first deputy prime minister overseeing the defence sector, in accordance with an individual near the Russian authorities’s subcommittee on international investments and three individuals concerned in ongoing western company exits.
Manturov is a protégé of Sergei Chemezov, who served within the KGB alongside Putin within the Eighties and now heads state defence conglomerate Rostec, the individuals mentioned. Manturov’s rising inventory within the Kremlin — he was promoted in Could — has made him an necessary determine to dealer exit offers, they added. Manturov — like Chemezov — is topic to sanctions.
“The impunity doesn’t appear to have gotten to his head. He’s good at placing offers collectively — he’s cheap, observes the formalities, and doesn’t demand an excessive amount of for himself,” mentioned one of many individuals concerned in a number of latest exit offers.
The ministry of commerce has acted “like an octopus” beneath Manturov, mentioned one other one who has labored on quite a few exit offers. “They’re redistributing the property and construction of the financial system in a very particular manner, guaranteeing they’ve their very own curiosity,” the particular person mentioned, including that this has been a boon for “medium-level sharks” like Arnest.
Previously commerce and trade minister, Manturov visited the Arnest plant in 2019.
His household have shares in an agricultural enterprise that had ties with Sagal, in accordance with Russian impartial outlet The Bell. In December 2023, Kolos, an entity by which Sagal used to carry shares, purchased half of an apple and blueberry producer co-owned by Dinastia, an organization based by Manturov’s late father. In 2020 Manturov mentioned that Dinastia was a household enterprise from which he acquired earnings.
Sagal was a Kolos shareholder till a minimum of 2008, when the corporate stopped disclosing possession particulars, in accordance with a quarterly report on its web site.
Kolos is now owned by Nina Valter, 61, who was beforehand a shareholder and director at numerous Arnest-linked corporations, in accordance with company filings. In July, it transferred its stake within the apple and blueberry producer to Denis Taran, an area entrepreneur.
“Sagal has by no means accomplished any enterprise with Denis Manturov’s household,” Arnest instructed the FT, including that Kolos “isn’t linked to the property of Alexei Sagal and Arnest in any manner”.
Arnest added: “As they go away the Russian market, worldwide corporations have been choosing consumers fastidiously. The important thing to Arnest’s negotiation success lies in its long-standing partnerships with worldwide companies.”
It cited earlier work with corporations like Oriflame and Unilever and the truth that each Arnest and Sagal underwent “a number of checks by worldwide corporations and authorities”.
Sagal began working with Arnest in 1996 as a distributor and collected a controlling stake within the firm by 2004, in accordance with an interview with enterprise information web site RBC final yr.
By then Arnest had secured its first contract with a international model, making cans for German shopper items big Henkel’s Taft hairsprays. It now produces and packages merchandise for the Russian market and international locations akin to Belarus and Kazakhstan.
Sagal additionally owns Russia’s Tersk Stud, one of many largest Arabian horse farms in Europe. A stallion belonging to Putin is housed there.
In a 2019 interview with Russian funding agency Veles Capital, Sagal mentioned the stud offered priceless networking alternatives, calling it “a promising bridge between Russia and the Gulf international locations”.
Arnest has turn into the frontrunner to purchase AB InBev’s stake in a $1.3bn Russian three way partnership after authorities rejected Turkish brewer Anadolu Efes’s bid in August, in accordance with one particular person with information of the talks. Anadolu Efes’s utility was rebuffed due to its proprietor’s supposed extreme help for Ukraine, the particular person mentioned.
Arnest is competing with different politically linked rivals, the particular person cautioned, nevertheless. Final yr, for example, Sagal thought his group had secured the acquisition of Baltika, Russia’s largest brewery, from Carlsberg earlier than finally dropping out to a longtime buddy of Putin.
AB InBev declined to remark. Anadolu Efes, which mentioned that it was “reviewing” the Russian authorities’ choice, didn’t reply to a request for remark.
Ball Corp, Heineken and Unilever declined to remark for this story.
The acquisition of US canmaker Ball Corp’s Russian property for $530mn was Arnest’s first massive deal because the Ukraine invasion. Russian media reported the deal was funded with a mortgage from VTB.
“Banks like VTB don’t give multibillion loans to simply anyone,” Shumanov mentioned. VTB, the Kremlin and the federal government didn’t reply to requests for remark for this story.
Arnest then acquired Heineken’s third-largest brewer for a symbolic €1, agreeing to tackle €100mn of present debt. It’ll quickly personal about €600mn value of property bought by Unilever, together with 4 factories.
“I wouldn’t say they’re little guys turning into massive guys,” one one who has labored on quite a few exit offers mentioned. “They’re little guys nonetheless working for giant guys.”
Extra reporting by Adam Samson