Citibank Evaluates Anadolu Efes Shares Following Russia's Joint Venture Transfer to Local Management

Investing.com -- On December 30, 2024, AB InBev Efes B.V.'s operations in Russia were temporarily transferred to local authorities under a presidential decree. This move came after Anadolu Efes (IS:AEFES) reached an agreement in October 2024 to acquire a 50% stake in AB InBev's business in Russia. This agreement is still awaiting regulatory approval.

Anadolu Efes's shares reacted strongly to this news, falling sharply. Although the stock rose by 1.6% on Friday, it remains about 25% lower than its peak in December.

The Russian government did not provide an official justification for this move. However, it is not an isolated incident. The government has previously applied temporary local management to foreign companies planning to sell their operations in Russia.

For instance, Carlsberg's assets in Russia have been under state management since July 23. The brewer regained control of its assets in December 2024, only after the state approved a buyer.

Other companies that have experienced similar temporary management include Danone's operations in Russia and Pulkovo Airport, which has shareholders from Russia and other non-Western countries.

"Overall, we believe that the current stock price reflects the market's view that the business in Russia has no value, including access to cash balances in the country. However, based on the precedent events mentioned above, we anticipate that the local management will likely be lifted once the agreement is approved by the government," said Citi analysts.

"Given that AEFES has no plans to exit the country, we expect that the company’s stake in its Russian business will remain unchanged, thus providing upside risks to the current zero valuation of the Russian operation."

"On the negative side, we believe the recent news increases the likelihood that AB InBev's stake in the joint venture will be sold to a local player (while AEFES retains its share), and based on similar precedent events, we think the resolution of the agreement could take longer than expected (from 8 months to more than a year)."

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