Western companies have left the Russian market in droves following the invasion of Ukraine in February. High-profile exits like McDonald’s and Adidas have grabbed the headlines, but smaller companies and banks have followed suit, beset by supply chain woes and hoping to avoid reputational damage.

In the ensuing rush to disburden themselves of Russian assets, many companies have sold to local investors at heavy losses. Most notably, Renault handed over its 68% stake in Russia’s largest carmaker AvtoVAZ to the government for just one ruble, according to an announcement by Russia’s Minister of Industry and Trade Denis Manturov.

Recently, reports have emerged in several Russian media outlets that Siemens Finance, a Russian leasing company owned by German industrial manufacturing giant Siemens AG, is fielding takeover offers. But the proposed sale – in far from ideal market conditions – is fraught with difficulties.

According to media reports, the main candidate for the takeover of the company could be linked to sanctioned businessman Said Gutseriev. bne IntelliNews sources say the value of the deal is in the region of €800mn

The predicament

Shortly after Russia invaded Ukraine, Siemens suspended all deliveries and new business activities in Russia and announced its intention to leave the country by the end of the year. It got into a high-profile standoff with Gazprom over an agreement to service parts of the Nord Stream 1 pipeline, prompting Russia to reduce gas flows to Europe in July.

But Siemens Finance, one of the 10 biggest lessors in Russia by new business volumes (which constituted around $1bln in 2021), has continued its work as usual. It announced that “no changes are planned in the operations of the company's representative offices” in a statement in mid-May.

The company also said that it was in active negotiations for a change of ownership, which it hoped would “open up new opportunities for the development of its business in Russia”.

The competition

Siemens Finance is a leasing structure associated with Siemens, which provides solutions for the acquisition of equipment, vehicles, and machinery to clients in Russia. The sanctions banning the export of high-technology equipment to Russia since the invasion of Ukraine have made the maintenance of machinery and vehicles more complicated, which may necessitate a re-orientation of the business.

According to Frank Media, the main candidates for the acquisition of Siemens Finance are Igor Kim’s Expobank and investment group Insight. The latter is understood to be founded by former managers of investment holding company SFI, which was controlled until recently by Gutseriev.

Russian business daily Kommersant concurs that Expobank and Insight are the main contenders for the purchase. Kommersant also identifies two further candidates for the takeover: Rosbank (owned by Vladimir Potanin’s Interros), and another company connected to Gutseriev – leasing company Europlan, which belongs to his former holding company SFI.

A source with knowledge of the matter has told bne IntelliNews that Insight or another company closely connected with the Gutseriev family is most likely to purchase Siemens Finance. The source has confirmed that the deal could be worth as much as €800mn.

Insight, one of the top contenders to purchase the company, is an investment group based in Moscow. Insight’s CEO, Avet Mirakyan, was the chief executive officer of Gutseriev’s SFI until 2022. He is also on the board of directors of electronics retail chain MVideo Eldorado, which was also majority owned by Gutseriev until he was hit with sanctions in 2022.

Nikita Tyurin, a senior associate at Moscow-based law firm Delcredere, explained that selling to a sanctions-linked company could present risks to both Siemens Finance and Siemens AG if it could be proved that the new owner is controlled by an EU-listed person.

If this were the case, Tyurin said, “that would mean that the share deal between Siemens AG and the new owner could violate EU “blocking” sanctions and would require authorisation by German authorities (Deutsche Bundesbank in particular). If such a deal were to be authorised, and the takeover were to take place, then Siemens Finance LLC would come under control of an EU-listed person and would be subject to blocking sanctions, which in turn would cut the company’s ties to European counterparts.”

Siemens and Siemens Finance were contacted in relation to the deal, but declined to comment.

The money question

If the transaction were to go through, it is not clear how Insight would finance it. According to company documents seen by bne IntelliNews, Insight had only RUB12,500  (around $210) of authorised capital to its name as of August 15 2022.

The same documents also indicated that Insight has just one employee and total net assets of RUB10,000.

In mid-July, media group RBC announced the exit of Avet Mirakyan from investment holding company SFI, citing sources close to the company. One of RBK’s sources is quoted as saying that “along with Mirakyan, several other top managers of SFI are leaving to work together on developing their own projects.”

Information provided by bne IntelliNews sources reveals that multisectoral conglomerate Safmar was interested in acquiring Siemens Finance, and actively held talks to that end in the spring.

Safmar, which is owned by Said’s father Mikhail Gutseriev, was apparently later ruled out of the process, possibly due to the fact that both individuals are sanctioned by Western jurisdictions.

The connections between Mirakyan and Gutseriev have raised concerns among Russia observers that the proposed Insight deal could serve to benefit the Gutseriev family in some way.

Insight’s CEO Avet Mirakyan told bne IntelliNews that “our company has no business with any members of the Gutseriev family”.

Mirakyan declined to answer questions about the value of the potential transaction and Insight’s plans for Siemens Finance, saying “we do not comment on any rumors or assumptions made by media or other persons or entities”.

Sanctions

On 21 July 2021, Mikhail Gutseriev was added to the EU sanction list. The EU characterised Gutseriev as a “long-time friend of Alexander Lukashenko” and issued him with an asset freeze and a travel ban.

The UK also sanctioned Gutseriev on 9 August 2021. The Treasury said that he is “one of the main private investors in Belarus and a longstanding associate of Alexander Lukashenko, who is responsible for serious violations of human rights and the repression of civil society and democratic opposition in Belarus. Gutseriev has provided support for the Government of Belarus, including through use of his business interests.”

Mikhail Gutseriev’s son, Said Gutseriev, claims he has no financial links with his father. He was hit with sanctions by the UK on 29 July 2022 for “obtaining a benefit from or supporting the government of Russia” in his role as a director of SFI. The sanctions entailed an asset freeze, including his London property portfolio which the Guardian values at £160m.

A deal between a European parent company and a potentially sanction-linked Russian company would be unusual. “Most “sanction-sensitive” deals concern situations where a listed person wishes to lose control over a business entity in order to avoid sanctions-related implications for the company,” explained Tyurin. “In this case the situation is quite the opposite: the listed person potentially obtains control over a company. There is not much precedent for such transactions. It could be a challenge for the parties to get past the compliance stage."