The Turkish brewer Anadolu Efes experienced a significant stock decline following the Russian government’s decision to place the company’s joint venture with Anheuser-Busch InBev under the control of a local entity. This action marks a potential turning point for the brewer, as the Russian market represents a substantial portion of its earnings.
Following a decree issued by Russian President Vladimir Putin, control of AB InBev Efes Russia has been transferred to the Vmeste group of companies on a temporary basis. This move effectively nullifies a previous agreement reached in October that would have seen Anadolu Efes become the sole owner of the Russian operations. The decree provided no details regarding Vmeste, leaving investors and analysts with unanswered questions.
The market reacted swiftly to the news, with Anadolu Efes shares plunging 10% on Tuesday, culminating in a two-day loss of 19% – the most dramatic decline since 2001. The impact extended beyond Anadolu Efes, affecting parent company Anadolu Grubu Holdings AS and sister company Coca-Cola Icecek AS, which also saw their share prices fall.
Anadolu Efes acknowledged the situation in a statement, indicating that they, along with AB InBev, are evaluating the implications of the decree and will take appropriate action. The uncertainty surrounding the future of the Russian operations raises significant concerns about the company’s long-term financial outlook.
JPMorgan downgraded Anadolu Efes’s 2028 dollar bonds, highlighting the substantial contribution of the Russian market to the brewer’s profitability. According to JPMorgan, nearly two-thirds of Anadolu Efes’s earnings in the first half of 2024 were derived from Russia. The analysts warned of a potentially permanent negative impact on the company’s credit profile if the seizure becomes permanent without adequate compensation to shareholders.
This incident is not an isolated case. The Russian government has previously taken control of assets belonging to international companies attempting to divest from the Russian market, often favoring alternative bidders aligned with the Kremlin. Carlsberg A/S experienced a similar situation, temporarily losing control of its Russian subsidiary before regaining it prior to a sale to an approved buyer. Even jointly owned assets with investors from countries considered friendly by Russia have been subjected to this temporary management strategy. For example, Pulkovo Airport, co-owned by German and Qatari investors, was placed under state control before shares were returned following a stake sale to an Omani firm.
The current situation with Anadolu Efes underscores the complex and unpredictable nature of operating in the Russian market. The lack of clarity surrounding the duration and ultimate outcome of the government’s intervention introduces substantial risks for foreign investors. The future of AB InBev Efes Russia remains uncertain, and the market awaits further developments and the company’s response to this significant challenge.
