French bank Societe Generale said on Monday it would quit Russia with a deal to sell its stake in Rosbank to Interros Capital, a firm linked to Russian oligarch Vladimir Potanin, the head of mining giant Norilsk Nickel.
Under the deal, Rosbank will rejoin the business empire of Potanin, 61, who has been sanctioned by Canada as part of a wave of western moves against Russia's business and political elite in retaliation for Moscow's invasion of Ukraine.
$3.3 BILLION WRITE OFF
The financial terms of the sale were not announced, but SocGen said it would result in a hit of more than 3 billion euros ($3.3 billion). Interros has also agreed to pay off Rosbank’s subordinated debt. The negative impact on SocGen's capital buffers was just 20 basis points and the bank said it was sticking to its share buyback and dividend plans.
SocGen had previously flagged the risk of a write-off on its 99% stake in Rosbank and investors welcomed the clarity, sending its shares up as much as much as 8% on Monday.
The sale to Potanin was not universally applauded.
"It's a bit distressing that ultimately this is an enormous gift to one of the wealthiest oligarchs," said Jerome Legras, head of research at Axiom Alternative Investments.
The French finance ministry declined to comment when asked whether the government played a role in the negotiations. It declined to comment on Potanin’s status as a sanctioned individual.
Russia's invasion of Ukraine, which Moscow describes as a "special operation," has prompted a wave of foreign companies to shutter their Russian businesses. Orchestrating a full exit is, however, more difficult due to the sanctions and political sensitivities.
SocGen’s exit is the first among major banks with European rivals including Italy’s UniCredit and Austria’s Raffeisen still considering their futures in Russia.
Asked whether SocGen's deal meant other companies could sell their assets to Russian buyers, Kremlin spokesman Dmitry Peskov said on Monday: "This depends on the decision of an owner of a specific company which is leaving Russia."
SocGen said the deal would allow it to exit Russia in an "an effective and orderly manner" and ensure continuity for Rosbank's employees and clients.
Potanin's holding company had owned Rosbank from 1998, before SocGen bought a stake in 2006 and merged it with its other Russian operations in 2010. SocGen paid https://www.societegenerale.com/sites/default/files/pressrelase/06132gb.pdf $317 million for its initial 10% stake in Rosbank.
Potanin, Russia's second richest man with $27 billion worth of assets according to Forbes magazine estimates, worked in the Soviet Union's foreign trade ministry and later as a banker before establishing Interros in 1990, an umbrella for his assets which range from metals production to a ski resort.
During the 1990s, Potanin served as Russia’s first deputy Prime Minister, masterminding the first wave of privatizations of former state-owned and himself buying several large businesses, including a stake in mining giant Nornickel.
Following Moscow's invasion of Ukraine, which began on Feb. 24, Potanin said that confiscating assets from companies that had left Russia would shatter investor confidence for decades.
"Interros intends to make every effort to develop Rosbank's business, considering the integration of digital technologies and products into the traditional banking services as a priority. The most important goal of Interros is to maintain the stability of Rosbank and create new opportunities for its clients and partners," Potanin said in a statement.
Interros said that the Rosbank deal should be closed in the next couple of weeks after all necessary approvals from regulatory bodies are received. ($1 = 0.9152 euros)
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