Masterflex SE reorganises its Russian business
The Executive Board signed an agreement to convert the Russian equity interest into an exclusive partnership with the Russian partner SovPlym
Gelsenkirchen, 2nd of October 2015 – With the approval of the Supervisory Board, the Executive Board today signed an agreement to convert the Russian equity interest into an exclusive partnership with the current joint venture partner and future Russian sales partner SovPlym Ltd. The agreement includes the sale of Masterflex SE’s 51% stake in 000 Masterflex RUS, in which SovPlym already has a stake of 49%, and the conclusion of an exclusive trade partnership agreement with SovPlym.
The business base for the cultivation of the Russian market is being adjusted because of the significant changes in political and legal parameters in Russia that have occurred since the joint venture was founded. In 2010, the Masterflex Group’s decision to enter the Russian market together with a local partner was made under completely different political and economic conditions. Since the onset of the Ukraine crisis in 2014, however, parameters in Russia for European businesses have changed considerably. Besides the significantly weaker economic development in Russia, management and controlling from (Western) Europe has become difficult. This relates not only to exchange rates but also legal security for European companies and the scope to intervene as owners.
Therefore, the Executive Board considered carefully and decided to convert the involvement on the Russian market into a new, exclusive partner structure: Masterflex RUS will in future be held solely by SovPlym and can therefore no longer trigger any possible shareholder risks for the Masterflex Group. The Russian market will furthermore be supplied with high-tech hoses by Masterflex RUS. Therefore, the Masterflex Group will exclusively supply its Russian sales partner with raw materials and the necessary products if the know-how and equipment required are not available locally. The more sophisticated hoses and connector solutions will – as before – continue to be produced at the German locations and delivered to Russia from there. The new sales partner will drop the name “Masterflex RUS” after a transitional period of a few months. However, the Masterflex Group’s products will continue to bear its name.
A currency hedge was concluded for the purchase price payable in two instalments. Deconsolidation and deduction of all costs will leave low six-figure proceeds for the Masterflex Group. The transaction was signed today and executed immediately; there is a guarantee from a Russian bank for the Russian partner’s payment obligations.
This reorganisation of the Russian business improves the market position of the Masterflex Group: Possible shareholder risks from the Russian business are now obsolete. This year, the Masterflex Group will receive a notable, economically fair sum equivalent to its majority interest. In future, it will be sustainably involved in the opportunities of the Russian market as the exclusive supplier of primary and other products from its extensive connector portfolio. Overall, the Masterflex Group is thus largely securing its opportunities for the future, while reducing its economic and legal risk.
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