Russia takes temporary control of Danone, Carlsberg assets

Russia seized control of the local subsidiaries of France’s Danone SA and Denmark’s Carlsberg A/S under a decree aimed at companies from “unfriendly” countries.

Shares of Baltika Brewing Company, owned by Carlsberg, and Danone Russia JSC will be transferred to Russia’s Federal Property Management Agency for “temporary management,” according to the decree by President Vladimir Putin.

Stock in both Danone and Carlsberg fell more than 1% in early trading Monday.

Danone and Carlsberg planned to leave but have struggled to do so. The seizure is a warning to others like Coca-Cola Co., which said in March it stopped operations in Russia but relaunched sodas under a local brand, according to a Goodbody analyst.

The decision won’t affect Danone’s financial guidance and the company is taking steps to safeguard its shareholder rights in Russia, the Paris-based food company said in a statement. Carlsberg called the decision “unexpected” and indicated it’s assessing legal and operational consequences as well as any financial impact.

Putin signed a decree in April allowing for “temporary” state control over the assets of companies or individuals from “unfriendly” states — which include the US and its allies – in response to similar moves, or the threat of them, by those countries.

Sunday’s move is the second time the Kremlin has used the decree to seize assets. Previously, Russia took control of utilities owned by Finland’s Fortum Oyj and Germany’s Uniper SE.

Danone, which makes yogurt and baby foods, planned to sell most of its business in Russia but intended to keep 25% of shares and stay on the board of directors. It expected the sale could result in a write-off of as much as €1 billion ($1.1 billion).

Carlsberg in June found a buyer for Baltika, the Russian unit said at the time. “Following the presidential decree, the prospects for this sales process are now highly uncertain,” Carlsberg said in a statement Sunday.

“Carlsberg may need to do a full write-down to zero in connection with upcoming results,” Mads Lindegaard Rosendal, a credit analyst at Danske Bank A/S, said in a note. “That said, we do not see this as a large blow to the credit case as investors have likely already discounted the Russian activities.”

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