For Alexei Sagal, an industrialist from Russia’s southern Stavropol province, Vladimir Putin‘s full-scale invasion of Ukraine has been transformative, according to a report in Financial Times. The horse-breeding enthusiast has become a key buyer of assets from Western companies fleeing the country. Last week, his Ernest Group, which made money as a contractor to some of the world’s biggest consumer goods groups, agreed to buy Unilever‘s Russian business for €520 million. He previously took over the Russian operations of Dutch brewer Heineken, US canning giant Ball Corporation and Swedish cosmetics group Oriflame.
Earnest’s sales revenue doubled, from 7.4 billion rubles in 2021 ($77 million) to 13.9 billion rubles last year, while core profit soared about 24 times, from 40.6 billion rubles to 972.8 billion rubles, according to company disclosures. Sagal’s rapid rise to prominence illustrates how the war has unleashed the country’s biggest redistribution of assets since the collapse of the USSR, and given rise to a new generation of capitalists with ties to the been “Ernest was relatively unknown until companies were looking to sell assets, and then he became a regular and successful bidder,” he told the Financial Times a lawyer who worked with the exits of Western companies. “The mass exodus has created a new generation of entrepreneurs.”
Sagal, the favorite
Finding buyers acceptable to both Western regulators and the Kremlin has become increasingly difficult for companies looking to exit Russia, the executive explains. Multinationals must conduct extensive due diligence on bidders and sometimes seek approval from their own watchdogs to ensure they do not fall foul of Western sanctions.
Founded in 1971 as a state-owned chemical plant in Sagal’s hometown of Nevinnomissk, Arnest has an advantage: Sagal has not been subject to sanctions by Western powers. The businessman is also close to Denis Manturov, Russia’s first deputy prime minister who oversees the defense sector. Manturov is a protégé of Sergei Chemezov, who served in the KGB alongside Putin in the 1980s and now heads state defense conglomerate Rostec. Manturov has become an important figure in negotiating exit deals. “They are redistributing the assets and the structure of the economy in a very specific way, making sure they have their own interest,” a source told the Financial Timesadding that this has been a boon for “mid-level sharks” like Ernest.
Indeed, Arnest has become the favorite to buy AB InBev’s stake in a $1.3 billion Russian joint venture after authorities rejected a bid from Turkish brewer Anadolu Efes in August, according to a person with knowledge of the conversations. Anadolu Efes’ application was rejected due to its owner’s alleged excessive support for Ukraine, the source told the FT. A year ago, Ernest acquired Heineken’s third largest brewer for a symbolic price of 1 euro, and agreed to assume 100 million euros of existing debt. It will soon have around €600 million worth of assets sold by Unilever, including four factories.
