Borjomi Handover Sends Alert Signal to Georgian Companies
07 February, 2013
Borjomi Handover Sends Alert Signal to Georgian Companies
Recent handover of control package of IDS Borjomi International, producing famous Georgian mineral water Borjomi to Russian-based Alfa-Group, sends an alert signal to Georgian companies, eyeing Russian market. They surmise that the guaranteed ticket to Russian market can be acquired only by selling shares to Russian investors. Georgian economic analysts fear that a latent share-handover process is going on between Georgian companies and Russian investors that will not lead Georgian economy to the safer side.
The first round of negotiations
between Georgian and Russian sides on returning the Georgian wine and mineral waters to the Russian market that was held in Moscow on February 4, 2013, turned out successful and 60 Georgian companies expressed their will to resume export to Russia. According to Levan Davitashvili, Head of Georgian National Wine Agency, who led the official delegation of Tbilisi, as well as Genadi Onishchenko, Head of RosPotrebNadzor, a sanitary body of Russian Federation that banned Georgian agriculture products including wine and mineral water from Russian market in 2006 under alleged sanitary reasons, Georgian wine and mineral waters may get back to Russia starting this spring or even earlier.
Georgian economic analysts greet the happy end of negotiations leading to reopening of Russian market but beware of some blots on the landscape. They fear that Russian market will be open to big companies able to get the required quality certificates that are quite expensive and hardly available to petty fry who used to take their product to Russia without problems before the trade embargo.
The suspended requests of reputable companies like IDS Borjomi International and Davit Sarajishvili Brandy submitted at Onishchenkos’ office in summer of 2011 makes Georgian economic analysts suspect that Russia expects more than actual quality certificates from Georgian companies. As a matter of fact, both IDS Borjomi and Davit Sarajishvili Brandy hold number of internationally acknowledged quality certificates/awards that light green to their export to the most pretentious EU market but fail to secure Onishchenko’s consent for over two years already. Georgian analysts presume that the so called Russian quality certificate means to acquire certain shares of targeted Georgian companies by Russian investors. The recent divesture of IDS Borjomi’s control-package to Russian-based investment company Alfa-Group a week ago and the benevolent response of Onishchenko, admitting Borjomi to Russia by the end of last week prompt economic analysts to think that similar transactions with other Georgian companies [that crave for Russian market] loom in prospect.
“The time when ordinary Georgian farmer could pack his car by fruit and vegetables and take it to Russia is gone,” Paata Sheshelidze, President of the Free Economy School, said.
He is afraid that Russia’s insistent requirement for so-called quality certificates means bribing of certain officials in Russia, since holding of international certificates did not help such reputable companies as Borjomi and Sarajishvili to get an access to the Russian market. On the other hand, to secure guaranteed entrance to the Russian market, Georgian companies will be tempted to find Russian partners and invite them in their business.
“I fear that it [selling shares] may become a general tendency, specifically for small and medium companies that cannot afford quality certificates; they will be tempted to yield shares to Russian partners to avoid problems at Russian market. If Borjomi did so, smaller companies are expected to refer to this remedy,” Sheshelidze elaborated.
IDS Borjomi International does not reveal the purposes and details of the transaction with Alfa-Group, one of the biggest and most influential Russian investment companies enjoying connection at the Kremlin. The only available source reporting on the transaction is Forbes according to which, the IDS Borjomi International was assessed at roughly USD 500 million and Inna Gudavadze, a widow of the late Georgian tycoon Badri Patarkatsishvili who held 87% of IDS Borjomi Beverages that is the key asset of the group, inherited the said share and divested 55.8% approximately a week ago. At any rate, Russian media reported on January 27 that the transaction was completed. “The family continues to have a significant interest in IDS Borjomi, notwithstanding the recent transaction. We are very proud to be associated with this great and historic company. The recent share sale provides the opportunity for IDS Borjomi to grow and develop new and exciting opportunities, which is very important for us and the new shareholders,” Gudavadze commented to Georgian Journal. No more details of IDS Borjomi hand-over are disclosed and no official statement put on official web-pages of either IDS Borjomi or Alfa-Group as yet.
Ditrikh Muller, a co-founder of Georgian Investment Group, presumes the divesture of Borjomi shares is connected with Boris Berezovsky, a Russian billionaire in exile and wanted by Russian police for alleged criminal actions. It is an open secret that Berezovsky was a buddy to Patarkatsishvili and shared almost all businesses based on 50 to 50% with him. Berezovsky has serious debt problem since summer of 2012 and was reported by Russian media to be intent to sell his shares in Selford Capital Partners incorporating IDS Borjomi among other assets.
Georgian wine companies such as Tbilvino and Khetsuriani Cellar deny any kind of attempts to get to Russian market in exchange of handing their shares off. They swore with GJ that none of them have ever heard anything like that to be practiced in other companies either. Muller believes the process is latent like Borjomi one when the involved sides did not speak of the deal openly but transaction was concluded meanwhile. He warns Georgian companies to focus on European market and western investors able to bring in companies innovations and free market principles rather than on Russian investors prone to latent deals and scarcely expected to bring in new technologies and management that is an essential aspect of attracting investors in the country. Besides, Georgian export is not supposed to be as significant in Russia as it used to be before embargo.
“Georgia is not rich with brands like Borjomi and divesture of national property and treasury for the sake of Russian market is not the price our companies should pay,” Soso Archvadze, an economic analyst, stated. “Russian market is no longer like the old one, which our business used to know, the niche we lost six years ago, is already filled and we can scarcely get 30% of it now. We’d better focus in diversification of export markets.”
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