15 Aug 2022 --- Mondi agreed on Friday to sell its largest Russian paper plant, Syktyvkar, to Augment Investments Limited, an investment vehicle majority owned by billionaire Viktor Kharitonin, for RUB 95 billion (around US$1.5 billion).
The sale follows a series of logistical and ethical problems thrown up by Moscow’s invasion of Ukraine, which Mondi said made it “profoundly concerned about the war in Ukraine and shocked by the humanitarian impact.”
However, the importance of local jobs, and Russia’s place as a major source of revenue for Mondi, made it difficult for the company to leave immediately.
The sale of the Syktyvkar plant in the Komi Republic marks the beginning of the end of Mondi’s presence in the country. The company operates three converting plants in Russia, which are much smaller in size, not affiliated with Syktyvkar and not part of the sale.
Russia divestments
In May, Mondi began divesting from its Russian assets following criticism as most other Western paper packaging businesses began exiting the country in a show of protest against the war.
Many packaging companies have cut ties with Russian paper production over the Ukraine war.As of December 31, 2021, the net asset value of the Russian operations was €687 million (US$726 million). While Mondi emphasizes its humanitarian concerns, business volatility caused by the war posed an increasing threat to the company’s functioning in the region.
The sale of Syktyvkar is conditional on the approval of the Russian Federation’s Government SubCommission for the Control of Foreign Investments and customary antitrust approvals. The sale is also subject to the approval of Mondi’s shareholders at a General Meeting.
The net proceeds from the sale will be distributed to Mondi’s shareholders as soon as reasonably practicable.
The announcement that it would distribute the proceeds of the sale to shareholders caused Mondi’s London-listed shares to jump 7% on Friday.
Syktyvkar
Syktyvkar is a wholly owned integrated pulp, packaging paper and uncoated fine paper mill located in Syktyvkar (Komi Republic).
The Business employs approximately 4,500 people, and it is a leading provider of uncoated fine paper and containerboard to the domestic Russian market.
Major paper packaging groups and forestry standards authorities began freezing their operations in Russia and Belarus in a show of protest against the invasion of Ukraine as early as March this year.
The divestments were expected to deliver a heavy blow to the Russian economy, further threaten global price rises and degrade environmental sustainability efforts.
While Western governments have not yet targeted the Russian forestry trade for international sanctions, some of industry’s most prominent fiber-packaging corporations – like Stora Enso and UPM – announced early they would be shuttering all trade with Russia due to the “unacceptable” war in Ukraine.
By Louis Gore-Langton
