Fridman’s Alfa Group to exit all Russian assets

Fridman’s Alfa Group to exit all Russian assets
/ bne IntelliNews
By bne IntelliNews May 5, 2023

Alfa Group of sanctioned oligarchs Mikhail Fridman and Petr Aven is planning to exit all its Russian activities and split the group into domestic and overseas divisions, the BBC reported citing unnamed sources and Andrew Baxter,  member of the board of Luxembourg-based ABH Holdings, which controls Alfa Bank and Alfastrakhovanie insurance company.

London-based Fridman his partner Petr Aven of the Alfa Group were preparing to sell another major asset in Russia one of the largest private banks Alfa Bank for RUB178bn ($2.3bn) to long-time partner Andrei Kosogov

Kosogov used to head Alfa’s investment unit and has not been sanctioned by the West, making him an attractive candidate for taking over the bank. The deal would have to be approved by Russian authorities, who have most recently allowed Dutch-based multinational mobile major VEON to offload its anchor Russian operator VimpelCom.

But, Alfa could go further and sell its insurance division Alfastrakhovanie and continue to fully split the assets in Russia into a separate entity.

Reportedly, Fridman and Petr Aven, who did not return to Russia after the full-scale military invasion of Ukraine, will take over the overseas business, while their Alfa partners German Khan and Alexei Kuzmichev will take over the Russian business. 

"We were waiting for the Iron Curtain to close on our side, but it is more tightly closed on the other side, so it is impossible to do business both in Russia and in the West," a source in Alfa's management told the BBC. 

"We are now co-ordinating with European regulators on the sale of the Russian bank and the approach to other transactions: sale, redomiciliation or restructuring with a spin-off of the business," Baxter said.

BBC reminds that both Fridman and Aven are actively seeking to have Western sanctions lifted. Campaigning was under way to lift sanctions from Fridman, Aven and another Alfa Group partner, German Khan, as they have long disputed claims of close Kremlin ties. The billionaires “want to do everything they can to get out of their Russian assets so that sanctions will be removed,” one of the people with knowledge of the transaction told the Financial Times in March.

Alfastrakhovanie is the fourth-largest insurance company in Russia, with RUB152bn of premiums collected in 2022. Its share is up to 25% in the car insurance market and 23% in the life insurance market. 

The Luxembourg-based ABH Holdings SA is owned by Andrei Kosogov (41%), Mikhail Fridman (32.9%) and Pyotr Aven (12.4%). UniCredit SpA owns a further 9.9% and the Mark Foundation for Cancer Research another 3.87%. Khan and Kuzmichev sold their stakes in ABH Holdings to Kosogov in March 2022 due to sanctions. Prior to the deal, the former owned 21% and the latter 16.3%.

BBC also reminds that Alfa controls a minority stake in Russia’s largest retailer X5 Retail Group, which is said to co-operate with the Russian Defence Ministry on the provision of uniforms and foodstuffs for the war in Ukraine.

Last week German energy major Wintershall Dea also said it has taken a “final” decision to leave Russia and is considering “various exit options”. The company is owned by German chemicals giant BASF and Fridman’s investment vehicle LetterOne.

Alfa Group was part of a consortium of Russian oligarchs AAR (Alfa Access Renova) that held a major share in the Russo-British oil joint venture TNK-BP that they sold to state-owned oil major Rosneft in March 2013 in a $55bn deal. Mikhail Fridman took his share of the proceeds and set up LetterOne (aka L1) in London. Prior to Russia's invasion of Ukraine this investment vehicle has been trying to get back into the oil business internationally, as well as making other profitable investments

Fridman grew to prominence in the 1990s after his Alfa Group made him a billionaire. After getting his start as a window cleaner in the aftermath of the collapse of the Soviet Union he went on to found a business empire that includes Alfa Bank, the highly successful X5 retail and supermarket group and numerous other businesses.