By Oyintari Ben
Due to a “lack of progress” in obtaining clearances, Must saMondi Plc (MNDI.L) announced on Monday that it has cancelled a 95 billion rouble ($1.17 billion) deal to sell its largest facility in Russia to an investment entity headed by Russian billionaire Viktor Kharitonin.
By 1200 GMT, Mondi’s London-listed shares, a British paper and packaging company, were down 1.6% at 1,270 pence.
This is an unusual instance of a business backing out of a deal to sell assets in Russia, where the Kremlin has pushed Western businesses to sell to domestic investors or businesses from nations that are favourable to Russia.
Mondi Syktyvkar, a pulp, packaging paper, and uncoated fine paper mill situated in the Russian capital of the Komi Republic, was to be sold by the firm to Augment Investments in August of last year.
Even though the agreement with Augment Investments had fallen through, Mondi stated that it “remains committed to divest the plant and will continue to assess all alternative divestment options.”
As a result of sanctions put in place by Western nations in response to Moscow’s invasion of Ukraine, several businesses ceased or stopped operating in Russia last year.
Some were able to secure quick departures by selling at steep discounts or turning over the keys to the local management.
Even if the rate of exits has significantly decreased, the rules are becoming increasingly challenging for those still inside.
In December, the Russian government mandated that businesses that were leaving the country sell their operations for at least half of what they had originally paid, and it claimed 10% of the proceeds as an “exit tax” for the government.
In April, it also seized the German Uniper (UN01.DE) and the Finnish Fortum (FORTUM.HE) property.
According to executives, getting approval from a government body is a time-consuming and challenging process.
Separately, in December, Mondi and Moscow-based Gotek Group reached an agreement to sell three of Mondi’s Russian packaging conversion businesses for 1.6 billion roubles.
