RUXX: Threat of Asset Freeze May Derail the Borjomi Sale

Moscow, Oct. 3, 2012 /PRNewswire/ -- A multi million-dollar deal to sell Borjomi, a mineral water brand famous in the former Soviet Union, as well as other assets of Salford Capital Partners, a company controlled by Russian businessman Boris Berezovsky and his late business partner Boris Patarkatsishvili's heirs, may be foiled if reports of a Russian court putting a freeze on Salford's assets in Russia is confirmed. The court injunction was allegedly ruled on Tuesday, said a RUXX Index Alert citing a source close to the deal. RUXX Index tracks Russian stocks traded internationally.

Owners of Salford Capital Partners that controls IDS Borjomi and other FSU and Eastern European assets began looking for buyers for this asset earlier this year. TPG Capital, the Russian Private Equity Fund, Klever Asset Management and Sistema have been named among possible prospective bidders. However, many potential buyers stepped away from the deal after finding out that IDS Borjomi was ultimately controlled by Berezovsky and Patarkatsishvili's heirs who are currently under criminal investigation. The police searched Borjomi offices in September 2012.

A source connected with the deal has told RUXX that a freeze on Berezovsky's and Patarkatsishvili's other Russian, Balkan, Georgian and Ukrainian assets appears likely. Salford owns significant assets in these countries and regions.

Analysts value IDS Borjomi at more than USD 400 million. However, RUXX Director of Research Ilya Lushnikov believes political and legal risks associated with the asset may be overwhelming. "Buying an asset that is likely to be seized under a court order would come with very significant risks and may make sense only for a buyer enjoying support of the Russian authorities, which would provide insurance against an asset freeze," says Lushnikov. "Salford also has substantial assets in several Balkan countries whose treaties with Russia are likely to entail an asset freeze in the Balkans as well."

IDS Borjomi is Salford's biggest asset. The company is a major player on the Russian mineral water market. It controls two large bottlers in Russia, and bought a large mineral water producer in 2009, whose brand portfolio includes the popular Russian brand Sacred Spring. Salford also owns several mineral water brands and bottlers in Ukraine, Borjomi mineral water springs in Georgia, and Bambi and Knyaz Milos plants and brands in the Balkans.

RUXX Index tracks Russian companies traded offshore and follows major economic developments that can affect valuation of Russian assets.

Ilya Lushnikov
+1 (917) 475 6452


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