Nutritek to Sell Russian Dairy Assets

Baby food and dairy products company Nutritek is selling its Russian dairy business to RussAgroProm holding for $350 million, it said Thursday, as government price caps on milk put strain on the industry.

Nutritek will immediately sell all of its six dairy plants across the country and an agro-holding in the Vologda region for $250 million in cash to newly created dairy holding RussAgroProm, the two firms said in a joint statement.

Nutritek will get the remaining $100 million if it decides not to exercise an option to buy back 30 percent of the assets over the next five years.

The money will go toward repaying debt and expanding in Southeast Asia, the Baltic countries and other former Soviet states, Nutritek chief executive Gennady Popov said in the statement.

Vedomosti quoted Nutritek chairman Georgy Sazhinov on Thursday as saying the proceeds would also be used to redeem credit linked notes worth $100 million and to upgrade facilities.

Nutritek, a subsidiary of Nutrinvestholding which floated its shares in April this year, is currently building dairy and baby-food plants in China, Singapore and New Zealand, as the domestic Russian market faces state-imposed price caps.

The caps were put in place after milk powder prices more than doubled this year, fuelling inflation that is set to reach double digits, surpassing state forecasts.

As the country prepares for parliamentary elections on Dec. 2 and a presidential vote March 2, around 20 food retailers have agreed to freeze prices on staples such as milk until Jan. 31. An extension until March 31 is also being considered.