US/RUSSIA: CEDC transfers operational control to Russian Standard chief
Russian Standard pumped millions into CEDC last year
Central European Distribution Corporation (CEDC) has handed operational control to leading shareholder and Russian Standard owner Roustam Tariko in return for US$65m in funds.
Russian Standard, which injected $310m into CEDC last year, will have the right to appoint the directors in charge of CEDC's operations through a newly-formed committee led by Tariko, CEDC said late last week. The US-based vodka maker's Russia GM, Grant Winterton, will take over as CEO on 10 January, CEDC said.
The transaction “is intended to stabilise CEDC's business and to pave the way for CEDC to address its balance sheet issues”, CEDC said last month.
The investment will consist of $50m previously pumped into CEDC with restrictions lifted and a new $15m revolving credit facility available from the start of next month, CEDC said.
According to Reuters, the latest agreement between the two companies follows a rejection by CEDC earlier in December to give operational and financial oversight to directors designated by Russian Standard parent Roust Trading in exchange for much-needed funds.
CEDC said that, under the new deal, responsibility for restructuring the company's capital will be handed to a committee led by CEDC directors unaffiliated with Russian Standard. Russian Standard has agreed to release a total of $107m in funding if restructuring plans meet its approval.
CEDC, which operates predominantly in Central and Eastern Europe, has lost market share in its core Russian market in the past couple of years, shrinking from 14.4% in 2010 to 12.4% at the start of last year. In year-to-date results in November, sales dropped by 4%, while third-quarter vodka volumes in Russia plunged by 22% to 24.4m litres.
An analyst suggested at the time that CEDC, which mainly operates at the value end of the market, is being squeezed on both sides as more affluent Russians trade up to premium brands and low-income consumers drop into the illegal, non-taxed sector.
To read CEDC's official statement, click here.
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