Mondi Plc, a British paper and packaging company, has announced the termination of a $1.17 billion deal to sell its largest plant in Russia. The plant, JSC Mondi Syktyvkar, located in the Komi Republic, was intended to be sold to an investment vehicle owned by Russian billionaire Viktor Kharitonin.
The decision to scrap the deal was made due to a "lack of progress" in obtaining the necessary approvals from Russian authorities. This move comes as a surprise, as it is uncommon for companies to back out of asset sales in Russia, especially with the pressure from the Kremlin for Western companies to sell to local investors or those from Russia-friendly nations.
Following discussions with Augment Investments Limited, the buyer, Mondi confirmed its withdrawal from the agreement, thereby terminating the sale.
Mondi's Board remains committed to divesting the Syktyvkar plant and its affiliated entities. Alternative divestment options will be explored to carry out the sale. Meanwhile, the proposed disposal of Mondi's three Russian packaging converting operations to Gotek Group, announced in December 2022, is still in progress and unaffected by the termination of the Syktyvkar deal.
The lack of approval from Russian authorities has been attributed to the possibility of the transaction price being too high. The Syktyvkar assets were expected to be sold to Augment Investments Limited for RUB 95 billion.
This development comes amid a trend of Western forest-based companies selling their Russian plants. Since the beginning of the war in Ukraine in 2022, a total of 13 plants have been sold by Western companies operating in Russia.
The board of Mondi Group announced its decision to divest the group’s Russian assets in May 2022. "Mondi remains profoundly concerned about the war in Ukraine and is shocked by the humanitarian impact. We express our deepest sympathy to all those affected by the ongoing hostilities, reiterating our call for an urgent cessation and a peaceful resolution", said the company in the first quarter report.
Mondi had acquired the Syktyvkar pulp mill in 2002 for $300 million.
