Unilever agrees sale of Russia business to Arnest

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Unilever is set to sell its Russian assets to the Arnest chemical group owned by businessman Alexey Sagal, in a major U-turn for the FTSE 100 consumer goods giant.

The parties have submitted the deal for approval to the Russian government subcommittee on foreign investments, which has become a required step for western companies exiting Russia since its invasion of Ukraine.

The sale could bring Unilever up to $500mn, Russian media reported.

The government has already approved the deal, Russian business outlets Kommersant and RBC reported, citing unnamed sources.

Two people involved in western companies’ exit from Russia told the Financial Times that no formal approval has been issued yet but the state is ready to greenlight the sale.

Unilever declined to comment. Arnest did not immediately respond to a request seeking comment.

The deal includes Unilever’s subsidiary Unilever Rus LLC, which owns the domestic rights to the company’s brands, including Knorr, Dove, Domestos and Axe.

According to media group RBC, the deal is expected to bring Unilever Rbs35—40bn ($340-500mn), reflecting the required 50 per cent discount on asset sales under Russian law. The giant will also have to pay 10-15 per cent exit tax from it.

In 2023, the Russian business contributed approximately 1 per cent of Unilever’s turnover and net profit, and it had approximately €600mn of net assets, including four factories in the country, according to the company.

“At Russia’s current standards this is not a bad deal at all, and the buyer is not hit by sanctions, which is hard to find,” a person working on another exit told the FT. 

Until now Unilever — which is under pressure from shareholders including activist investor Nelson Peltz to shake up the company and boost growth after years of lacklustre financial performance — has continued to trade in Russia, attracting controversy as many western brands have pulled out since the invasion of Ukraine.

Peltz’s Trian Partners declined to comment on Unilever’s proposed sale.

The FTSE 100 company was labelled as an “international sponsor of war” by the Ukrainian government, which published a list of companies it deemed to be indirectly contributing to the war.

In February the company said it reviewed its position in Russia during 2023 and concluded that “the containment actions we put in place at the beginning of the war minimise our economic contribution to the Russian state”. 

While still trading there, Unilever has stopped advertising and halted imports and exports from Russia, and in July chief executive Hein Schumacher told reporters that the company had “localised operations”. 

Arnest, meanwhile, has long been Unilever’s contract manufacturer in Russia. Founded by Russian businessman Sagal in the 1990s, the group initially produced Dichlophos, Russia’s top insecticide at the time, but soon expanded using western financing.

After Russia’s February 2022 invasion of Ukraine, Arnest acquired around $1bn worth of assets from western companies that had left Russia, including the Dutch brewing group Heineken and factories belonging to Ball Corporation of the US, the world’s largest producer of aluminium beverage cans.

Peltz, who is on the Unilever board, told the FT this year he had pressed the consumer goods group, which had previously explored options for a sale, not to leave Russia. “If we pull out of Russia, they will take our brands for themselves. I don’t think that’s a good trade,” Peltz said at the time. “Why the hell should we?”

Additional reporting by Harriet Agnew in London