Russian M&A review 2018€¦ · Russian M&A largest deals in 2018 Target Sector Acquirer Vendor % acquired Value USDm 1 Rosneft Oil & Gas Qatar Investment Authority Glencore 9.18%

Russian M&A review2018February 2019

KPMG in Russia and the CIS

kpmg.ru

http://www.kpmg.com

ForewordWelcome to the 14th edition of the annual KPMG Russian M&A Review.

In the past year geopolitical uncertainty continued to adversely impact the aggregate value of Russian M&A, and stopped investors from making significant deals. However, we see the signs of M&A growth potential in the near future, due to the release of pent-up demand, which has been building ever since sanctions were imposed. The economic downturn observed during the recent years of sanctions has eased somewhat, and a stable positive trend in 2017–2018 indicated that the Russian economy has learned to adapt to the 2014 sanctions; as a result, investors are now more confident about planning deal activity in the coming year. However, there are still a number of issues, that will impact headline activity and investor sentiment in 2019, including what happens next with the sanctions, the oil price trend, and other uncertainties.

In this edition of the Russian M&A Review we reflect on key recent trends and the effect that they will have on M&A processes in upcoming years. Our predictions are based on a thorough analysis of M&A market statistics as well as our diverse experience in supporting M&A deals and processes across the Russian market.

In addition to a statistical analysis we as before share our thoughts on complex current issues, such as the restructuring of corporate debt by banks and the most prominent M&A trend (the one being seen in the Innovations & Technology sector). In addition, the Metals & Mining sector is showing increased activity and we also look at this theme in our review.

We hope that you enjoy reading this year’s KPMG Russian M&A Review. We will be happy to answer any questions that you have.

Lydia Petrashova

Head of Deal Advisory Russia and the CIS Partner

Ly d i a P e t r a s h o v a

© 2019 KPMG. All rights reserved.

2 Russian M&A review 2018

ContentsOVERVIEW

p. 4

OUTLOOK FOR 2019

p. 10

p. 28

METHODOLOGY

p. 27

KEY M&A ISSUES IN 2018

Russian Innovations & Technology 15

Debt restructuring transactions 19

Metals & Mining 23

p. 14

APPENDICES

Macro trends and medium term forecasts 29

Appetite and capacity for M&A 30

Cross-border M&A highlights 31

Sector highlights 32

2018 IN REVIEW

p. 7


3Russian M&A review 2018

Overview

The value of M&A deals recorded in 2018 stood at USD51.7 billion, down 7% on the figure for 2017, mainly due to an absence of larger deals.

USD51.7bln –7%

However, there was a notable increase in the number of deals, from 552 to 652 separate transactions. The highest

growth in deal activity was recorded in the Innovations & Technology sector, which in 2018 demonstrated a threefold year-on-year increase to 113 deals. We will cover this later in our review.

This shows that, while large investment deals have been affected by uncertainty created by the sanctions and global events, as well as waiting for greater clarity on the government’s plans for digitalisation and national projects, there is steady progress in terms of diversification and the emergence of new economic sectors.

Source: KPMG analysis

Russian M&A (2012–2018)

Number of dealsDeal value (excl. mega deals), USDbn

Mega deals (>USD10 bn), USDbn

79.5

100.9

79.0

52.0 64.8

56.0 14.4

11.3334 333

621

470 482

55.3

552

51.7

652

2012 2013 2014 2015 2016 2017 2018



2018 can best be described as a year of consolidation in the Russian economy, as reflected by a number of large share buy-backs in the top 10 M&A deals of the year1. Such deals amounted to 15% of the total deal value in 2018 (compared to just above 1% in 2017). The available indicators point to GDP expansion of around 1.6% for the year, or almost similar to the growth recorded in 2017. This indicates that the economy has adjusted to the 2014 round of US and EU sanctions and to the lower average oil price, and is now more exposed to domestic drivers.

1 Lukoil announced a buy-back on the open market of its common shares and depository receipts for an aggregate amount of up to USD3 billion; the Rosneft board of directors approved a share buy-back of up to 3.2% of the company’s shares, for USD2 billion; MegaFon repurchased its own shares, representing in total 18.6% of its share capital, for USD1.12 billion.

However, the most important takeaway from the results of the past year is that after several years of oil revenue recovery and a conservative fiscal policy, Russia is now much less dependent on foreign inflows to advance its investment programme.

As for the outlook for 2019, there are still a number of uncertainties that can impact headline activity and macro trends in the economy, as well as investor sentiment. These include what happens next with the sanctions, the oil price trend,

events in the global economy such as whether there is an escalation in the trade war between the US and China, the fallout from Brexit in Europe, and what effect the US Federal Reserve Bank’s policies will have on the US dollar and global capital flows.



Russian M&A largest deals in 2018

Target Sector Acquirer Vendor % acquired

Value USDm

1 Rosneft Oil & GasQatar Investment Authority

Glencore 9.18% 4,427

2 LUKOIL Oil & Gas LUKOIL Minority shareholders 5.2% 3,000

3 Arctic LNG 2 Oil & Gas Total SA Novatek 10.0% 2,550

4 Magnit PJSC Consumer Markets VTB Bank Sergey Galitskiy (private investor)

29.1% 2,442

5 Rosneft Oil & Gas Rosneft Minority shareholders 3.2% 2,000

6 Promsvyazbank*Banking & Insurance

Deposit Insurance Agency (DIA)

Private shareholders 99.9% 1,967

7 Donskoy Tabak Consumer Markets Japan Tobacco Inc. Agrocom Group 100.0% 1,582

8OC Oerlikon Management

Innovations & Technology

Vladimir Kremer (private Iivestor); Evgeny Olkhovik (private investor)

Renova Group of Companies

23.1% 1,324

9 MegaFonCommunications & Media

MegaFon Minority shareholders 18.6% 1,124

10 AliExpress Russia Innovations & Technology

MegaFon; Mail.ru Group; Russian Direct Investment Fund

Alibaba Group 52.0% 1,053

* The transaction is part of insolvency proceedings being undergone by Promsvyazbank.

10largest deals in period USD21.47bln

as a % of total transactions in 201841.5%



2018 in review

The key levers of growth in the past year were a combination of higher oil and gas output, as the OPEC deal ended, and increased consumption. Retail sales, for example, expanded by 2.6% year-on-year, as real wages grew by 7.5% and real disposable income increased by just above 1%.



However, 2018 was also a year when a number of issues, which will affect the future direction of the

economy as well as opportunities for investors, came to the fore more clearly but were not resolved. Hence 2018 could also be viewed as being a wait-and-see period for investors that tended to slow investment activity and placed expansion plans on hold. The two key issues for investors are 1) clarity over the government’s plans for national projects (sometimes referred to as the “May decrees”), and 2) what happens next vis-à-vis US sanctions and how it will affect business in Russia. These two issues will likely have the greatest influence on the investment climate this year.

The future shape and impact of the sanctions is always hard to predict; too many factors and personalities are involved. What we can say is that Russia has quite successfully adapted to the sectoral sanctions imposed in 2014. Those forced the country to take serious measures, such as devaluing the rouble and adopting the budget rule, and this helped provide a boost to some sectors (such as agriculture and domestic manufacturing) and stabilise the economy. However, the escalation seen in 2018 has raised concerns among investors and led many to delay spending decisions and expansion plans.

2018

2017

2018

2017

3261

37 68

134

11353

48

74165

6372

78

3855

39

58

10

14.2

8.1

5.2

7.5

5.56.4

5.35.3

9.14.9

1.8

2.4

1.62.0 6.1

3.21.5

2.30.1

4.046

53

33

7.2

3.3

Deal value by sector: 2018 vs. 2017, USDbn

Deal volume by sector: 2018 vs. 2017

Oil & Gas

Consumer Markets

Real Estate & Construction


Metals & Mining

Banking & Insurance

Transport & Infrastructure

Communications & Media

Automotive

Agriculture

Other


In 2018 only two key industrial sectors saw year-on-year growth in the value of transactions: oil & gas and consumer markets.

The biggest reductions in values were recorded in the banking, metals and mining, and real estate sectors. However, as mentioned above, deal activity has grown, particularly in the Innovations & Technology sector, which, we believe, indicates the future investment vector in Russia.

The National Projects Strategy Programme was announced directly after the presidential elections in March, when Vladimir Putin set out the priorities for his six-year term. The President tasked the government with identifying key growth and investment areas in order to modernise the economy, creating diversification in relation to activity and exports,

and resolving a number of existing problems, including labour and skills shortages. The programme, which is scheduled to be finalised in the first quarter of this year, is expected to give a boost to investment activity and set in motion the process that will finally see Russia go from being a hydrocarbon and commodities dependent economy to one with much greater diversification and less growth volatility. Digitalisation and infrastructure improvements are expected to be among the most important themes of the finalised programme.



Overall economic sustainability resulted in a steady rise in inbound investment flows (the value of such deals grew by 23% in 2018), particularly from European and Middle Eastern countries, which accounted for 42% and 35%, respectively, of the USD14 billion in inbound M&A announced in 2018.

+23%

While this was chiefly driven by two large acquisitions in the oil & gas sector (a 9.18% stake in Rosneft by Qatar Investment Authority and a 10% stake in Arctic LNG 2 by Total SA), the number of inbound deals fell by 21% in 2018.

The government focus on digitalisation led to greater interest on the part of Russian investors in foreign Innovations & Technology companies. Such deals amounted to 70% of total outbound M&A value in 2018, with the largest deals being led by the Russian private equity and venture capital company DST.



2012 2013 2014 2015 2016 2017 2018

107.392.2

57.336.0 39.3

12.0

4.6

13.8

5.115.3

16.3

33.7

4.1 14.0

18.4

7.9

10.9

21.5

38.7

5.211.4

394

213 229

476347 379

48

48 41

74

5848

110

73493

72

87

63

71

65 55

2012 2013 2014 2015 2016 2017 2018

Domestic Outbound Inbound

Domestic Outbound InboundSource: KPMG analysis


Russian M&A deal value by type (2012–2018), USDbn

Russian M&A deal volume by type (2012–2018)

Outlook for 2019T

he position taken by the Russian Government is that most events, that have an impact on headline activity and macro trends in the economy, are beyond

its control, and it is therefore planning on moving forward with the National Projects Strategy Programme, while also maintaining a generally conservative fiscal and monetary policy stance.

Headline growth is forecast to dip in the first half of 2019 and may be just either side of 1.0% year-on-year compared to the same period in 2018. This is partially due to the expected impact on consumption of a hike in the VAT rate on 1 January, from 18 to 20%. In the second half of last year, ahead of the VAT hike, there was a rise in consumption (especially of vehicles and durable goods), which will be offset by a decline in the first half of 2019. Surveys also indicate that consumers are generally fearful of inflation and economic uncertainty, hence this too will negatively weigh on growth. Investment volumes will also likely remain low throughout the first half of the year, as companies and investors wait to see what happens with the sanctions and for clarity vis-à-vis the National Projects Strategy Programme.

There is expected to be a pick-up in the second half of the year, as investment into national projects begins and due to macro trends, such as inflation, being more settled. This should translate into growth during the year being slightly down on 2018, but at the same time the economy will be better positioned for more rapid expansion in 2020. Growth in and from 2020 is projected to be driven by a combination of investment spending and a recovery in manufacturing sectors (as localisation trends continue), in the agriculture sector (as current export bottlenecks in ports are resolved) and in consumption (as incomes grow in real terms, confidence picks up and concerns over issues such as pension reform fades).

GDP

After a number of years of oil revenue recovery and a conservative fiscal policy, Russia is now much less dependent on foreign inflows to advance its investment programme.



Headline inflation finished 2018 at 4.3% year-on-year, and the Central Bank of Russia (CBR) has warned that the rate will go up during the first half of this year, to peak at around 5.5% by mid-year. This will partially be driven by a weak rouble and a rise in fuel prices. However, the CBR expects the rate to ease back to 5% by the year-end and to decline steadily in 2020, to finally reach the target of 4%. The projected upward trend in the first half of 2019 is expected to weigh on consumption in this period but subsequently, as the rate starts to ease in the second half of the year, confidence should be restored.

InflationIn 2018 the rouble lost 17.6% against the US dollar and 12.9% against the euro, although approximately 5 percentage points of these declines came in late December, due to seasonal Forex demand, and they had been reversed by mid-January. The key driver of rouble volatility is sanctions-related news; however, in the absence of any major escalation, in 2019 the currency is forecast to remain within the government’s target range of RUB/USD67-72. There is now a preference for a stable but weak rouble in order to boost economic competitiveness and help better manage the federal budget.

Currency

The CBR turned more hawkish in late 2018 as it saw inflation rise and the rouble weaken on the back of concerns surrounding the sanctions. The CBR Governor also expressed concerns over a possible contagion from global events, such as the upward trend in US interest rates. The key rate was raised to 7.75% late last year, and the CBR has warned that it may raise it again in Q1 or Q2, although not by more than 25 or 50 basis points. The key rate is projected to start falling from early 2020, due to inflation easing and the rouble (as projected) being more stable.

Interest ratesThe adoption of the budget – or fiscal – rule helped return the federal budget to being in surplus in 2018 after a number of years in deficit. The budget rule caps the oil price assumption used in the federal budget at USD42 per barrel, and any revenues earned above this are diverted to the National Fund to help pay for, e.g., national projects. The federal budget breakeven level last year was USD57 p/bbl, hence the surplus of over 2% is based on the higher average oil price. The breakeven level this year is forecast to be approximately USD48 per barrel. This also means that the Finance Ministry does not have to tap international debt markets in 2019 if it assesses that respective conditions are unfavourable.

Government finances



In 2019 the sectors likely to be of greatest interest to investors and to see a high level of M&A activity are:

Oil & GasCapex spending in the oil sector is continuing to grow, and the Energy Ministry expects growth in annual output for a number of years before a peak is reached. This will continue to open up opportunities for investment and, in particular, sector consolidations as companies seek to boost output through acquisitions. Sanctions have created demand for domestically sourced oil field services, and this trend is set to continue in the coming years. Companies are actively looking for add-ons to expand their service offerings and to grow.

The energy focus in Russia is shifting towards LNG. The largest projects are likely to include the next phases of the Yamal LNG project, the first phase of which is now operating at full capacity. A number of other projects have been proposed by Gazprom and some of the oil majors, and these are expected to progress this year. Over the coming years there is forecast to be strong growth in LNG processing in Russia, which will continue to offer good investment opportunities for international partners.

ConsumerThe Russian consumer sector continues to expand, having shaken off the effects of the recession years of 2015 and 2016. A market of 146 million consumers offers significant potential for growing existing services and introducing new products and services. Real wage growth will continue, and even though consumer credit grew by close to 20% last year, the market is still considerably underleveraged and thus has strong growth potential.

TechnologyA small part of the National Projects Strategy Programme is focused on technology and digitalisation of the economy – a high priority area for the government. Regulations are forecast to change, to allow for a more investor friendly environment, and other incentives have been introduced. The projected cost of the programme over the next four years is in excess of USD25 billion.



Real EstateThe real estate and construction sectors have lagged in recent years, but are now beginning to attract investment. Modern warehousing and affordable housing, using government-subsidised mortgage schemes, are major priorities.

TransportExpanding and upgrading existing transport and logistics infrastructure are also high on the list of government priorities. Some of the largest projects to be listed on the national projects programme will include high-speed rail links and road upgrades. At the same time there is a clear need to improve trade ports, including in relation to access and handling, to help boost export volumes in such areas as agriculture. Some of these projects are already under way and many more are expected in the coming years, with foreign investors having the same access as local investors.

AgribusinessThe agriculture sector saw strong growth in 2015-2017, boosted by the weak rouble and the Russian ban on imported food products. Last year the volume output stalled close to the previous year’s record level, partially due to the adverse weather conditions, but also on account of infrastructure limitations related to moving, storing, and exporting goods. These bottlenecks are currently being resolved, hence growth should resume in 2019 and 2020. Continued expansion in the agriculture sector and in food processing remain high priorities for the government.

ChemicalsRussia intends to process more minerals and extracted materials within the country, so as to boost value-added exports. Investments in chemical and petrochemical facilities have grown and, according to a preliminary disclosure of national project priorities, this remains a key area for future growth.



Key M&A issues in 2018

Russian Innovations & Technology

Debt restructuring transactions

Metals & Mining



This year Innovations & Technology sector saw a threefold increase in the number of closed deals, reflecting the overall focus of the economy on digital transformation. Supported also by Russian Government programmes, the sector is expected to attract significant investment flows in the year ahead.

In 2018 the Innovations & Technology sector saw the largest increase in the number of deals closed in Russia: 113 deals, vs 38 in 2017.

113 deals

It should come as no surprise, however, that technology deals made it to the top: the global economy is currently in the grip of a digital transformation that is altering the ways businesses operate, as well as how people live. This digital trend is universal, and hence the Russian market cannot escape its influence. Throughout 2018 businesses in our country, small or large, were investing in a range of digital solutions, from mobile applications to artificial intelligence and blockchain products.

Looking at the deal ecosystem in Russia, one observes a trend of Russian majors combining efforts to create new digital products and services – this resulted in some of the largest technology deals closed in 2018.

On-demand delivery services The Russian taxi market saw a number of deals in 2018.

The most notable was the creation of a joint venture between Yandex and Uber, which agreed to combine their ridesharing, food delivery, and related logistics businesses in Russia and the CIS.

The deal was announced in 2017 and was closed early in 2018, with Yandex owning 59.3% of the new company, Uber 36.9%, and the remaining 3.8% being owned by company employees. The combined business was valued as high as USD3.8 billion. Towards the end of the year the company launched a new mobile application for Uber Russia, which leverages Yandex.Taxi’s technological platform and algorithms.

In 2018 Yandex.Taxi also continued to develop its food delivery business, Yandex.Eda, which the company launched after acquiring Foodfox in late 2017. Foodfox and UberEats were combined into a single business line and began joint operations in early 2018. Yandex.Taxi, striving to grow its food delivery business, acquired in 2018 a 83.3% stake in Food Party, a company engaged in delivering cooking food products.


M a x i m F i l i p p o vHead of M&A in Innovations & Technology PartnerDeal Advsiory

RUSSIAN INNOVATIONS & TECHNOLOGY

Russian M&A review 2018 15


In addition to these deals, a group of investors led by MegaFon and Mail.Ru Group bought a stake in Citymobil, a Russia-based company that provides online taxi-booking services. The companies invested a total of USD35 million, with Mail.Ru Group and MegaFon acquiring 18% and 15% stakes, respectively. Subsequently Mail.Ru Group agreed to invest in the taxi aggregator Vezyot. These acquisitions followed Mail.Ru Group’s previous acquisition of the food delivery platform Delivery Club.

The consortium bought shares in AliExpress Russia from Alibaba Group, which retained a 48% stake in the company. Under the deal terms MegaFon will sell its 10% stake in Mail.Ru Group to Alibaba Group in exchange for a stake in the joint venture, Mail.Ru Group will contribute its Pandao e-commerce business (in addition to cash and distribution product integrations), while RDIF will invest new capital. As a result, MegaFon will own 24% of AliExpress Russia, Mail.Ru Group 15%, and RDIF 13%. The deal values AliExpress Russia at USD2 billion and the Russian consortium’s stake at approximately USD1 billion.

The new partners have outlined that the joint venture will become a one-stop platform for social media,

communications, gaming, and shopping. They are planning to leverage Alibaba Group’s global ecosystem to offer Russian consumers a greater range of high-quality products across all price segments, both from Russia and China, as well as from other countries. Furthermore, the platform will create significant opportunities for small- and medium-sized enterprises in Russia, by providing them with access to Alibaba’s 600-million customer base in all major global markets. Finally, by blending the strengths of each of the partners, the joint venture will accelerate the development of Russia’s digital economy, foster long-term technological cooperation, and help build the future infrastructure of commerce both in Russia and globally.

E-commerceYandex was involved in one more eye-catching technology deal in 2018, this time on the sales side.

In April 2018 the Russian state lender Sberbank acquired a 50% stake in Yandex.Market, an e-commerce retailing platform, from Yandex.

The stake was valued at USD509 million, and was paid for in cash. Post-deal, the two shareholders own 45% each, with the remaining 10% being allocated to an equity incentive pool for Yandex.Market’s management and employees.

Another notable deal in the Innovations & Technology sector was the announced acquisition of AliExpress Russia by a group of investors consisting of MegaFon, Mail.Ru Group, and the Russian Direct Investment Fund (RDIF).

With this transaction the lender is aiming to create a Russian version of Amazon2.

German Gref, CEO of Sberbank

2 �Source:�https://www.rbc.ru/finances/27/04/2018/5ae332279a79477da3f810a1



RUSSIAN INNOVATIONS & TECHNOLOGY

Digital investments of large telecoms

MegaFon was involved in another standout deal in 2018, the creation of a joint venture between itself, Gazprombank, Rostec, and USM Holdings. The new company, named MF Technologies, is intended for projects in the digital economy.

As a result of the transaction, MegaFon will own 45% of the new company, while Gazprombank, Rostec, and USM Holdings will each own 35%, 11% and 9%, respectively. Under the deal terms MegaFon also transferred a 5.2% stake in Mail.Ru Group to MF Technologies. The total transaction value was USD450 million.

Together with its partners, MegaFon plans to implement a number of digital projects, including software to digitalise the operations of major companies, as well as blockchain-based solutions. One of the most important projects of the partners is the development of a Financial Digital Platform. Using this platform, the companies will develop hi-tech services, including payment, credit, and other digital products. The partners will also create an investment fund for technology start-ups.

Another Russian telecoms major, MTS, was also active in the M&A market for digital products in 2018. In July it increased its shareholding in its subsidiary MTS Bank, a Russia-based universal commercial bank, by buying a 28.6% stake for USD131 million. The acquisition is set to help the company expedite decision-making

processes and reduce the time needed to market digital financial products. The deal signals the intention of MTS to strengthen its position in the Russian FinTech market, which is growing at a record pace of 10% each year.

MTS Bank was not the only technology deal from MTS in 2018. The company also invested USD19 million in Ozon, increasing its stake in the leading online Russian retailer from 11.2% to 13.7%.

The transaction was part of an equity raising process conducted by Ozon of more than USD60 million, with the remainder of the sum contributed by Baring Vostok funds and other investors. The investment in Ozon is a step taken by MTS as part of its digitalisation strategy. And in line with its strategy to develop into a strong Internet player, MTS closed two other deals in 2018: the acquisition of a 78.2% stake in Ponominalu.ru, for USD7 million, and a 100% stake in Ticketland.ru, for USD56 million – both companies are engaged in online sales of tickets for entertainment events. Further to these investments in the Internet segment, MTS acquired Gambit Sports, a European eSports organisation based in the UK, for an undisclosed sum.




Inbound investments

Despite a general slowdown in the inflow of foreign funds into Russian companies in recent years, the Innovations & Technology sector has seen a number of foreign investors expressing an interest in Russia.

The largest deal was the acquisition of the Russian transport safety systems manufacturer Transas by the Finnish technology group Wartsila Corp, which valued the target at USD258 million. Established in 1990, Transas currently controls around 30% of the global market of electronic chart and navigation systems, about 25% of the installations of onshore ship traffic control systems, and over 45% of the marine simulators market. It is claimed that the transaction will lead to the creation of “a new ecosystem for maritime operations”.

Overall, the technology sector was rich in acquisitions in 2018, with Russian majors continuing to roll out their digitalisation strategies. MegaFon and Mail.Ru Group were the leading domestic players in terms of number of transactions, and were followed by Yandex and MTS, which actively invested in technology solutions throughout the year.

Asian investors also demonstrated an interest in Russian companies in 2018. In February 2018, for example, the Hong Kong-based investment fund China Baoli announced it had bought an additional 10% stake in the Moscow-headquartered

smartphone producer Yota Devices, thus bringing its total stake in the company to 40%. The deal was valued at USD15.5 million, with USD0.5 million paid in cash and the remainder using China Baoli’s own shares.

Innovation and advanced technologies are rapidly expanding strategic areas, and interest in them from both the government and private business is growing each day. At KPMG we have a long-established expertise centre, devoted to helping companies in the Innovations & Technology sector thrive in a digital world. Our Innovations & Technology M&A team is unique in the market, and combines professionals with an extensive and diverse knowledge of advanced technology solutions and investment banking and deal support backgrounds. In addition, the KPMG Innovations & Technology sector team is playing an active role in the implementing of the Russian Government digitalisation programme, and works closely with companies participating in the programme.

P o i n t s t o n o t e



A n d r e i M i t r o f a n o v Head of Restructuring PartnerDeal Advisory

In general we are seeing a trend of Russian banks working with greater competence and professionalism with distressed assets, and we believe that as a result of adopting a well-thought-out strategy towards working with NPLs their level will decline in 2019 and beyond, provided that a stable macroeconomic environment is maintained.

The largest of these transactions included the Mechel PXF loan restructuring and the debt restructuring (including debt from Russian banks) of the Croatian company Agrocor. Despite this figure appearing substantial, we believe that, as was the case in previous years, the actual volume of restructuring transactions was more than 10 times greater. For example, in 2018 our restructuring team alone participated in projects with a total debt value of around USD10 billion.

In 2018 the publicly disclosed volume of corporate debt restructuring transactions with Russian banks did not exceed USD5 billion.

Up to USD5 bln

The vast majority of restructuring transactions are either not publicly disclosed or are not even treated as such by banks. We estimate that the real volume of debt restructuring transactions in 2018 involving Russian banks was in the range of USD60–100 billion.

In Russia, the main initiators of complex and large-scale publicly disclosed corporate debt restructurings have historically been international banks. However, due to the business of these banks in the country contracting dramatically in recent years, with a focus on servicing previously issued loans to the most profitable export-orientated sectors (such as the oil and gas industry and metals and mining), no significant restructurings were initiated in 2018 by international banks. As a rule, but with a few exceptions, in projects involving international banks the focus was on solutions developed by the largest Russian lenders. Russian banks preferred bilateral transactions with borrowers, and as a result the respective transactions were generally not made public.

We observed that restructuring transactions tend to go public when the bank itself recognises it as constituting a restructuring (as opposed to one tranche of debt being replaced with another), or if there is some public dimension to the debt (bonds, the debts of listed companies, etc.), or if the information is leaked by the press, sometimes at the initiative of the borrower or some other interested party.

DEBT RESTRUCTURING TRANSACTIONS




Since the recognition by banks of NPLs in their books can lead to significant losses, and because of bank secrecy, lenders have little interest in garnering publicity; therefore, restructuring transactions in Russia for the most part remain undisclosed (the majority of transactions that the KPMG team played an active role in were also not made public, and hence cannot be disclosed). This is illustrated, for example, by the fact that although the level of NPLs recognised by banks is on average around 7%, informally banking professionals estimate the actual level to be about 30%.

2018 was a year of restructuring not so much of borrowers, but of banks themselves, against a backdrop of government measures to improve the banking sector.

The size of the assets under BNA’s management also demonstrates the true level of NPLs in the Russian banking system: BNA received assets of the banks that made up only 6% of the total banking system, however the assets of these banks alone had a book value of over USD40 billion, and the volume of such assets is set to grow. The founding of the BNA was not only the most significant restructuring event in 2018, but also in recent history in terms of the scale of the project. This did not constitute a series of completed

restructuring transactions yet, but rather served as a preparation for them. The BNA began operating in the middle of 2018, and we expect that restructurings will take place in 2019-2020.

Despite non-transparency, based on our projects we nevertheless observe a number of stable trends in the Russian debt restructuring scene, which were strengthened in 2018 and which are quite interesting from an M&A standpoint.

An important event in the restructuring landscape was the setting up in the second half of 2018 of the Bank of Non-Core Assets (BNA), which has taken on various debts and shares from the borrowers of large distressed banks. The BNA has so far received an unprecedented level of problem assets from the banks Otkritie, Trust, Binbank, and Rost.

In Russia, a unique combination of bail-in and bail-out mechanisms continued as part of the process of working with NPLs: private banks first converted debt into the equity of their borrowers, then their financial performance deteriorated significantly, and, consequently, they were bailed out or turned around by the state via indirect recapitalisation through various state banks.



DEBT RESTRUCTURING TRANSACTIONS

In 2018 banks continued to implement the popular Russian approach towards the largest borrowers, where a bank performs a debt restructuring by refinancing existing loans under new conditions, which the borrower is able to fulfil. Moreover, these conditions can be quite preferential for the borrower (no debt repayments for several years, a reduction in the cash component of the interest, etc.) Banks, however, agree to such conditions because the available alternatives are often worse (e.g. enforcement is unlikely to yield a return of more than 30%; the sale of debt, as a rule, is performed at a discount of 50% or more). Sometimes refinancing conditions involve the introduction of a cash sweep mechanism, when all cash flows go towards debt servicing.

An interesting trend in 2018 from an M&A standpoint was that banks increasingly sought to become quasi-shareholders of their borrowers, and usually majority shareholders.

That said, banks’ desire to secure official shareholdings in this respect has become much less pronounced than in previous years, due to negative experiences related to recognising losses from the subsequent consolidation of assets, and a natural unwillingness on the part of banks to deal with the operational management issues of enterprises.

We have observed that the strategy adopted by banks when obtaining quasi-shareholder control over a problem borrower involves strengthening their position via purchasing at a discount debt from other creditors (debt consolidation), and obtaining personal guarantees

from shareholders. We have seen numerous examples of both large- and medium-sized projects in various industries (metals and mining, construction materials, auto dealer, oil and gas) where banks informally take control of a company, while the share capital continues to belong to the original shareholder. In such cases, banks may or may not have formal representation on a board of directors or within management, but any significant transactions are agreed with the bank. This set-up is possible for banks due to the continuous pre-default status of the borrower – the banks alone decide whether or not to extend the next tranche of a loan, on the back of the personal guarantee of the shareholder.

We also observed that banks, after gaining de-facto (and, less often, de-jure) control over a business began, irrespective of the shareholder’s wishes, to look for a buyer for the business – and it is here that we see a strong correlation between the debt restructuring and M&A markets.

There has been a trend for an increase in transactions between creditors to buy and sell debts during the restructuring process, i.e. where a creditor in the process of negotiating with a borrower acquires other creditors’ exposures. Such tactics can lead to a noticeable pruning of a lender’s portfolio, a concentration of collateral in the hands of one entity, and, in theory, an increase in the percentage of the return from a lender by rescuing the borrower and partially writing off the debt of other lenders. Such transactions between the lenders of one borrower occur much more frequently than deals involving the sale of debt to specialised funds, since access to information in such transactions is equal, unlike in transactions where a buyer purchases debt – the buyer knows little about the actual state of affairs of the borrower, the positions of different lenders, or future cash flow forecasts.

Such an approach to restructuring allows banks, by choosing the least damaging option, to stabilise the situation in the short term; however, in the medium term, businesses lose one of their main pillars: the motivation and drive of their shareholders.




O u t l o o k

These deals will be conducted both in the form of credit transactions and M&A transactions to sell assets (either capital or collateral) that have been transferred to the BNA. We do not rule out a preliminary consolidation of groups of assets on the balance sheet of the BNA before a sale, for the purposes of realising the maximum level of synergetic value from these assets.

We do not foresee a large number of debt restructurings featuring mining or export-orientated enterprises, provided that the macroeconomic situation remains stable. However, the bilateral restructuring of large borrowers by large banks will continue; this began several years ago and involves the periodic refinancing of loans with new ones for the same period – such transactions will as before not be made public. We believe that in 2019 a number of debt restructurings (possibly with an exit via an M&A) could take place in medium-sized agro-

industrial businesses. This is expected against a backdrop of a general debt burden within this sector and a decline in the incomes of its businesses, linked to a lack of purchasing power on the part of the public, and the continued consolidation of the agro-industry in the hands of large holdings. We do not rule out though that a number of players will simply leave this market. A situation similar to that in the agro-industrial sector prevails we believe in the air transport and auto dealer sectors.

In general we are seeing a trend of Russian banks working with greater competence and professionalism with distressed assets, and we believe that as a result of adopting a well-thought-out strategy towards working with NPLs their level will decline in 2019 and beyond, provided that a stable macroeconomic environment is maintained.

In 2019 we expect to see a number of professionally organised debt restructurings by the BNA.

In this rapidly changing environment, every company faces challenges. A step in the wrong direction can sometimes have significant effects on corporate performance and company value.

KPMG has been working in Russia with highly leveraged companies since 1998. And since 2009 our integrated team of restructuring professionals has overseen all the largest restructuring engagements in Russia and the CIS. In our work we draw on both Russian and international experience, engaging where necessary experts from KPMG firms globally, and having in place professionals from various areas, including financial analysis, tax, debt finance, operational restructuring, and M&A.

We have worked with companies in virtually every industrial sector and with all the largest banks in the Russian banking system, guiding our clients through challenging times to deliver real results for stakeholders.




2018 can be described as being a year of non-finalised transactions for companies in the metals and mining sector.

Throughout the year there was considerable activity in terms of preparing transactions, searching for investors, organising financing, and holding negotiations; however, only a fraction of deals were finalised. The reasons for this include the appetite of sellers, which continued to remain strong (fuelled by relatively high prices for raw materials and metals in the past two years), caution on the part of buyers, and stringent requirements being set by banks providing financing, related to the quality and profitability of assets.

Large deals that were announced but fell through included: the sale of a stake in Polyus Gold to a Chinese investor, FOSUN; the acquisition of a stake in Gold of Kamchatka, considered by the shareholders of Vysochaishy JSC; and a number of deals involving coal assets. Although all these make the results for 2018 rather modest, at the same time they indicate a high likelihood that several large transactions will be completed in 2019–2020.

O l g a P l e v a k oHead of Metals & Mining PartnerDeal Advisory

METALS & MINING

Russian M&A in Metals & Mining


Number of dealsDeal value, USDbn

6.0

22

2012 2013 2014 2015 2016 2017 2018

22

55 53

20

3128

5.3

12.2

7.58.8

6.44.9

During 2017-2018 several large deals were initiated in the Metals & Mining sector, but were never completed – therefore they are expected to be finalised in the near future.




One of the largest transactions in 2018, related to the acquisition of a 2.1% stake in Norilsk Nickel by Whiteleave Holdings (part of the Interros group), is under dispute. It was subject to an appeal at the London High Court, which ruled that the transaction was invalid; this decision was then appealed in November 2018 by both the seller and the buyer, and the question as to whether the transaction will be annulled was unresolved at the time of writing.

Overall, in 2018 the total volume of deals was down by more than 23% on the 2017 level; at the same time, there was a relatively small drop in the number of transactions – hence there was a fall in the average deal value.In 2018, as was the case in the previous five years, local deals were at the fore, both in volume and quantity terms. In 2017 the numbers were significantly influenced by a large deal to acquire an 18.8% stake in the En + Qatari sovereign fund and AnAn Group (Singapore), for USD1.5 billion. This year, transactions worth over USD1 billion have not been realised.

The largest deal announced in 2018 was the acquisition of the Baimskoye copper deposit, one of the largest in the world, by KAZ Minerals, for USD900 million in cash and shares.

During the first stage of the transaction, KAZ Minerals receives a 75% stake in the project, and for the remaining 25% there is a fee deferral, subject to the project conditions being fulfilled by 31 March 2019.

In recent years one of the main drivers behind M&A activity in the metals & mining sector has been the restructuring of the debts of mining companies, when borrowing banks initiate a change of ownership or the sale of a share of their enterprises to repay part of their debt, or revise loan conditions. This driver was especially pertinent for medium-sized transactions. Another significant driver

behind deals was the redistribution of shares among existing shareholders – this was an important feature of the largest deals.

Deals were also driven by strategic objectives, such as a desire to focus on key projects and to sell assets that are remotely located or which require additional management – for example, a series of deals initiated by Polymetal. For other players, the task of increasing the production base or building production chains remains significant. Such deals include the acquisition of the Malmyzh deposit by the Russian Copper Company at the end of 2018.



O u t l o o k

We expect to see a number of medium-sized deals in the coal segment and involving acquisitions of gold mining companies. The activity of ferrous metal companies in building supply chains, including in relation to iron ore raw materials and scrap preparation, has also recently witnessed a revival. Continuing the trend seen in recent years, in 2019 domestic transactions will

prevail in the sector, however, serious interest in mining companies on the part of Asian investors should be noted. Supported by intergovernmental organisations, as well as banks, we believe that a number of exciting deals can be looked forward to in the next one-to-two years.

Taking into account the significant backlog from last year, when deals were being prepared, we believe that 2019 will be rich in announced and completed deals.

We have worked closely with the most prominent Metals & Mining companies in Russia and the CIS for over 20 years, and have built up an extensive understanding of existing legislation, current issues and most recent trends, and how these may impact the business models of major players. The KPMG Metals & Mining practice, as part of the KPMG Global Centers of Excellence in Metals & Mining, is able to bring leading capabilities to Russia and the CIS region and to deliver bespoke solutions to our clients, which enable them to respond quickly and effectively to industry opportunities.


METALS & MINING





Methodology

1st January — 31st December 2018

KPMG Russian M&A databaseThis report is based on the KPMG Russian M&A database which includes transactions where either the target (inbound) or acquirer (outbound) or both (domestic) are Russian. All data is based on transactions completed between 1st January and 31st December 2018, or announced during this period but pending at 31st December 2018. Historical data may differ from earlier versions of this report as the KPMG Russian M&A database is updated retrospectively for lapsed deals and information subsequently made public.

Data includes transactions valued in excess of USD5 million, as well as transactions with undisclosed deal values where the target’s turnover exceeds USD10 million. Deal values are based on company press releases as well as market estimates disclosed in the public domain.

The KPMG Russian M&A database has been complied over a number of years based on information included in the Mergemarket M&A deals database and EMIS DealWatch database, together with KPMG desktop research of other sources.

The allocation of deals to industry sectors may involve using our judgment and is therefore subjective. We have not extensively verified all data within the KPMG Russian M&A database, and cannot be held responsible for its accuracy or completeness. Analysis of different databases and information sources may yield deviating results from those presented in this report.

Appetite and capacity for M&AOur analysis of forward-looking appetite and capacity for Russian M&A is based on the principles of KPMG’s M&A Predictor, a tool which tracks important indicators 12 months forward. The rise or fall of forward P/E (price/earnings) ratios offers a good guide to the overall market confidence, while net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratios helps gauge the capacity of companies to fund future deals.

Our analysis is based on 39 Russian companies for 2018, all the raw data within the Russian M&A review was sourced from S&P Capital IQ as at January 2019. The financial services and property sectors are excluded from our analysis, as net debt/ EBITDA ratios are not concerned relevant in these industries. Where possible, earnings and EBITDA data is presented on a pre-exceptional basis.

Macro trends and medium term forecastsMacro trends and medium term forecasts comprise publicly available data collated from State Statistics Agency, Central Bank, Apecon, Bloomberg and Macro-Advisory.



AppendicesMacro trends and medium term forecasts1

Appetite and capacity for M&A2

Cross-border M&A highlights3

Sector highlights4




APPENDIX 1. Macro trends and medium-term forecasts

Trend 2014 2015 2016 2017 2018 2019E 2020E 2021E

GDP, USD bln 2,000 1,360 1,347 1,635 1,551 1,556 1,633 1,836

Growth, real % YoY 0.7% –2.8% –0.2% 1.5% 1.6% 1.3% 2.0% 2.2%

Inflation - year-end, % YoY 11.4% 12.9% 5.4% 2.5% 4.3% 5.0% 4.0% 3.6%

Real disposable income, % YoY –1.0% –6.5% –5.9% –1.7% 1.0% 0.6% 1.5% 2.2%

Unemployment, % EOP 5.3% 5.6% 5.4% 5.0% 4.8% 4.8% 4.7% 4.6%

Budget, balance % of GDP –0.5% –2.4% –3.4% –1.4% 2.1% 1.6% 1.0% 0.8%

Current account, % GDP 3.0% 5.3% 1.9% 2.1% 7.1% 5.4% 4.6% 3.7%

RUB/USD, year-end 56.3 72.9 60.7 57.6 69.5 68.0 66.0 64.0

RUB/EUR, year-end 68.3 79.7 63.8 68.9 79.5 79.0 75.0 73.0

Brent, USDp/bbl, average 99 52 44 55 73 64 62 60

Source: State Statistics Agency, Central Bank, Macro-Advisory estimates



Market capitalisations recovered slightly in 2018 compared to 2017, but remained negative.

Forward P/E ratios, a measure of appetite, continued the negative trend of the previous year and were down -24.3% in 2018.

Net debt to EBITDA, a measure of capacity for M&A, is forecast to improve by an average 4.1% after a -15.1% decline in the past year, with only Metals & Mining having a negative outlook.

Dec 2017

Dec 2018

Market cap (Largest companies)

Appetite (Forward P/E ratio)

Capacity (Net debt/EBITDA)

–2.9%–3.0%–6.2%

4.1%

–2.9%

APPENDIX 2. Appetite and capacity for M&A

The market capitalisation of Russia’s largest listed companies saw almost no change in 2018, thereby continuing the negative trend of 2017 in all industrial sectors, except for Oil & Gas. Although capacity for M&A continued the previous year’s positive trend, appetite for deals was down significantly in 2018, reflecting the cautious attitude of investors.

–24.3%

4.1%

–24.3%

–15.1%



Inbound M&A deal value by region (2018 vs. 2017), USDbn

Source: KPMG analysis Source: KPMG analysis

Inbound M&A deal volume by region (2018 vs. 2017)

Outbound deal value by target’s region (2018 vs. 2017), USDbn

Outbound deal number by target’s region (2018 vs. 2017)

Europe

North America

CIS

Asia-Pacific

MEA

Other regions

Europe

North America

CIS

Asia-Pacific

CEE

Other regions

Source: KPMG analysis Source: KPMG analysis

APPENDIX 3. Cross-border M&A highlights

29%

2%2%18%

0.3%

57%

35%

2%

42%

13%

36%

6%

54%

4%

6%5%

8%

9%

33%

18%

2%

2018 2017

19%

7%

49%

11%

3%

17%13%

3%

52%

1%

33%

19%

32%

17%

11%

11%

13%

13%

14%

10%

19%

8%1%

24%19%

2018 2017 2018 2017

2018 20170.3%1%



APPENDIX 4. Sector highlights

Oil & Gas

Consumer Markets

Real Estate & Construction


Metals & Mining

Banking & Insurance

Transport & Infrastructure

Communications & Media

Automotive

Agriculture

Chemicals

Power & Utilities



O i l & G a s

C o n s u m e r M a r k e t s

SECTOR HIGHLIGHTS

Oil & Gas largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1 Rosneft Qatar Investment Authority

Glencore 9.18% 4,427

2 LUKOIL LUKOILMinority shareholders

5.2% 3,000

3 Arctic LNG 2 Total SA Novatek 10.0% 2,550

4 Rosneft RosneftMinority shareholders

3.2% 2,000

5 TatneftSAFMAR Financial Group

Minority shareholders

2.9% 698

Inbound

Outbound

Total value

USD7.3bn

Volume

32 deals Domestic

70.6%

176.1%

96.8%

–22.0%

Market share 27.5%

USD14.2bn

n/d

USD6.9bn

Consumer Markets largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1 Magnit VTB Bank Sergey Galitskiy (private investor)

29.1% 2,442

2 Donskoy Tabak Japan Tobacco Agrocom Group 100.0% 1,582

3 Magnit Marathon Group VTB Bank 11.8% 1,017

4 Eldorado M.VideoSAFMAR Financial Group

100.0% 794

5Trade Company Megapolis

Japan Tobacco International (JTI); Philip Morris International (PMI)

Megapolis Investment

10.2% 533

Inbound

Outbound

Total value

USD3.0bn

Volume

68 deals Domestic

305.4%

82.4%

–97.0%

55.6%

–5.6%

Market share 15.6%

USD8.1bn

USD0.1bn

USD5.0bn



R e a l E s t a t e & C o n s t r u c t i o n

Real Estate & Construction largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1 Suvorov Plaza SberbankInternational Centre

100.0% 828

2 MostotrestStroyprojectholding; Arkady Rotenberg (private investor)

Blagosostoyanie 94.2% 689

3 O1 Properties*Riverstretch Trading & Investments

O1 Properties 100.0% 378

4Rivyera Trade Centre

KLS Eurasia Venture Fund Ltd; KLS Securities

Sergey Gordeev (private investor)

100.0% 266

5 Nevsky CentrePPF Real Estate Holding; PPF Group

Stockmann 100.0% 198

I n n o v a t i o n s & Te c h n o l o g y

Innovations & Technology largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1OC Oerlikon Management

Vladimir Kremer (private investor); Evgeny Olkhovik (private investor)

Renova Group of Companies

23.1% 1,324

2 AliExpress Russia MegaFon; Mail.ru Group Limited; Russian Direct Investment Fund

Alibaba Group 52.0% 1,053

3 MF TechnologiesRostec; Gazprombank; MegaFon; USM Holdings

Joint

venture450

4Robinhood Markets

DST Global; ICONIQ Capi-tal LLC; Sequoia Capital; Kleiner, Perkins, Caufield & Byers (KPCB); NEA; Thrive Capital; CapitalG

Existing shareholders

6.5% 363

5 Transas Group Wartsila CorporationSergey Generalov (private investor)

100.0% 258

SECTOR HIGHLIGHTS

Market share

Market share 10.2%

Inbound

Outbound

Total value

USD0.7bn

Volume

134 deals Domestic

–32.3%

–6.3%

113.8%

–29.0%

71.8%

USD5.3bn

USD0.1bn

USD4.5bn

Inbound

Outbound

Total value

USD0.3bn

Volume

113 deals Domestic

–50.5%

102.3%

–4.3%

197.4%

USD5.3bn

USD3.0bn

USD2.0bn

10.3% * The transfer of assets was carried out in settlement of the debt of O1 Group, which amounted to USD378�million,�while�the�value�of�the�transferred�assets�is�estimated�at�USD3.5�billion.



SECTOR HIGHLIGHTS

M e t a l s & M i n i n g

B a n k i n g & I n s u r a n c e

Metals & Mining largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1 GDK Baimskaya KAZ Minerals Aristus Holdings 100.0% 900

2 Norilsk Nickel Interros Company Roman Abramovich (private investor) 2.1% 780

3 United Company RUSAL

Zonoville Investments Limited The ONEXIM Group 6.0% 658

4 Norilsk Nickel Interros Company Minority shareholders 1.6% 442

5 Polymetal International

Otkritie Financial Corporation Bank n/d 4.6% 230

Inbound

Outbound

Total value

USD0.9bn

Volume

53 deals Domestic

15.5%

–70.7%

250.3%

–23.6%

–3.6%

Market share 9.5%

USD4.9bn

USD0.3bn

USD3.7bn

Banking & Insurance largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1 Promsvyazbank*Deposit Insurance Agency


99.9% 1,967

2 Invest ProjectSAFMAR Financial Investments

Mikhail Gutseriev (private investor); Said Gutseriev (private investor); Radigton Enterprises

100.0% 210

3SAFMAR Financial Investments

Institutional investor(s)SAFMAR Financial Group

15.0% 163

4 Blagosostoyanie Gazprombank Russian Railways 50.0% 160

5Nu Pagamento SA (Nubank)

DST GlobalExisting shareholders

45.9% 150

Inbound

Outbound

Total value

USD0.2bn

Volume

48 deals Domestic

–67.8%

–40.5%

1,075.0%

–64.1%

45.5%

Market share 6.3%

USD3.3bn

USD0.3bn

USD2.8bn

* The transaction is part of insolvency proceedings being undergone by Promsvyazbank.



SECTOR HIGHLIGHTS

T r a n s p o r t & I n f r a s t r u c t u r e

Transport & Infrastructure largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1Novorossiysk Commercial Sea Port

Transneft Summa Group 25.0% 750

2 58 Suyun

58 Daojia Inc; Cainiao Network Technology Co Ltd; InnoVision Capital; Russia-China Investment Fund (RCIF)

n/d n/d 250

3 Transcontainer VTB Bank Far Eastern Shipping Company

25.1% 239

4 Sfat-Ryazan NefteTransService OTEKO 100.0% 207

5United Wagon Company

Riverstretch Trading & Investments; Pavel Vashchenko (private investor); Financial group Budushcheye

n/d 18.9% 169

C o m m u n i c a t i o n s & M e d i a

Communications & Media largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1 MegaFon MegaFonMinority shareholders

18.6% 1,124

2Mobile TeleSystems

Mobile TeleSystems Sistema 5.6% 478

3 ESforce Holding Mail.ru Group Limited

USM Holdings Limited; Anton Cherepennikov (private investor)

100.0% 100

4United Media Agency

Mail.ru GroupSalerton Investments Limited

80.0% 97

5 MDTZK Mobile TeleSystems iTech Capital; Sergei Solonin (private investor)

100.0% 56

Market share

Market share

4.5%

3.9%

Inbound

Outbound

Total value

USD0.0bn

Volume

53 deals Domestic

299.1%

–96.6%

56.1%

33.7%

35.9%

USD2.4bn

USD0.4bn

USD1.9bn

Inbound

Outbound

Total value

n/d

Volume

46 deals Domestic

–19.9%

–93.6%

–50.2%

–20.7%

USD2.0bn

USD0.0bn

USD2.0bn



SECTOR HIGHLIGHTS

A u t o m o t i v e

A g r i c u l t u r e

Automotive largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1 AvtoVAZAlliance Rostec Auto BV; Rostec; Renault SAS


53.5% 969

2 Pack&Fly Group Safe Bag SpA

Alexander Fedoseev (private investor); Polad Akmedov (private investor)

13.1% 289

3 Tekhnodinamika Dynamics Group of Companies

Russian Technologies State Corporation

75.0% 208

4 AvtoVAZAlliance Rostec Auto BV; Rostec; Renault SAS

Minority shareholders

3.4% 67

5 GAZ Group Rimma Kalmykova (Private Individual)

Ingosstrakh Insurance Company

17.5% 35

Inbound

Outbound

Total value

USD0.4bn

Volume

7 deals Domestic

1,728.2%

331.0%

952.6%

–30.0%

Market share 3.0%

USD1.6bn

n/d

USD1.2bn

Agriculture largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1Preobrazhenskaya Base of Trawling Fleet

Ostrov SakhalinFamily of Oleg Kozhemyako

96.4% 430

2Russian Fishery Company

Gleb Frank (private investor)

Maxim Vorobyev (private investor)

44.7% 311

3Novorossiysk Grain Plant (NGP)

VTB Capital Existing shareholders

69.1% 203

4 Altai Broiler Cherkizovo Group Prioskolie 100.0% 68

5

Moscow Processed Cheeses Plant Karat

Gleden Invest; Alexander Klyachin (private investor)

Sviaz-Bank; Vladimir Korsun (private investor)

100.0% 49

Inbound

Outbound

Total value

USD0.1bn

Volume

37 deals Domestic

–33.9%

–32.4%

–35.5%

–41.3%

Market share 2.9%

USD1.5bn

n/d

USD1.4bn



C h e m i c a l s

Chemicals largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1 Ammoni

Indorama Corporation; Russian Direct Investment Fund; Yadran-Oil

Tatammoniy; Venture Fund of the Republic of Tatarstan; State Development Corporation VEB.R

n/d 800

2 Uralkali Sberbank Dmitry Lobyak (private investor)

10.0% 374

3 Polyplastic Group

Strongfield; Valentin Buyanovsky (private investor); Miron Gorilovsky (private investor)

A1 Investment; A1 Group

48.2% 104

4Meleuzovskiye Mineral Fertilizers

PromkhimtorgGazprom Neftekhim Salavat

n/d 10

5Moscow Chemical Company

MetafraxVasiliy Sharov (private investor)

99.0% n/d

P o w e r & U t i l i t i e s

Power & Utilities largest deals in 2018Target Acquirer Vendor % acquired Value USDm

1 Inter RAODVB Leasing; Region Group; Inter RAO

Federal Grid Company of Unified Energy Systems

10.0% 554

2Siberian Energy Company (SIBECO)

Siberian Generating Company

n/d 78.0% 282

3 Inter RAO Inter RAO RusHydro 4.9% 272

4 Inter RAOInstitutional inves-tors

Management of Inter RAO

1.1% 73

5Izhevskie elektricheskie seti

RossetiVEB.RF – agent for government of Udmurt republic

100.0% 32

Market share

Market share

2.5%

2.4%

Inbound

Outbound

Total value

USD0.9bn

Volume

10 deals Domestic

–88.0%

>1000%

–60.8%

–16.7%

USD1.3bn

n/d

USD0.4bn

Inbound

Outbound

Total value

USD0.1bn

Volume

18 deals Domestic

–36.8%

–36.9%

28.6%

USD1.2bn

n/d

USD1.2bn

–19.5%

SECTOR HIGHLIGHTS





The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2019 KPMG. KPMG refers JSC “KPMG”, “KPMG Tax and Advisory” LLC, companies incorporated under the Laws of the Russian Federation, and KPMG Limited, a company incorporated under The Companies (Guernsey) Law, as amended in 2008. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

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ContactsSean TiernanHead of AdvisoryRussia and the CISPartnerT: + 7 495 937 4477 E: [email protected]

Lydia PetrashovaHead of Deal AdvisoryRussia and the CISPartnerT: + 7 495 937 4477 E: [email protected]

Maxim FilippovHead of M&A in Innovations & Technology Deal AdvsioryRussia and the CISPartnerT: + 7 495 937 4477E: [email protected]

Andrei MitrofanovHead of RestructuringDeal AdvisoryRussia and the CISPartnerT: + 7 495 937 4477E: [email protected]

Olga Plevako Head of Metals & MiningDeal AdvisoryRussia and the CISPartnerT: + 7 495 937 4477E: [email protected]

Documents

Russian M&A review 2018€¦ · Russian M&A largest deals in 2018 Target Sector Acquirer Vendor % acquired Value USDm 1 Rosneft Oil & Gas Qatar Investment Authority Glencore 9.18%