Mondi pulls out of sale of Russian paper mill

Paper and packaging group Mondi has withdrawn from the agreement to sell Mondi Syktyvkar to Augment Investments.

“This follows recent discussions with Augment on its lack of progress in gaining the necessary approvals to complete this transaction,” the company, valued at R149.5bn on JSE, said.

“As per the terms of the sale and purchase agreement, the disposal to Augment will therefore be terminated,” it added.

The deal, announced in August 2022, entailed the acquisition for €1.5bn (R31.2bn) by Augment of Mondi’s most significant facility in Russia in the form of an integrated pulp, packaging paper and uncoated fine paper mill in the city of Syktyvkar in the northeast of the European part of Russia and about 1,000km from Moscow.

The plant accounts for a portion of the region’s energy supply and is the primary source of heat and warm water for a district in Syktyvkar, while also providing other services, such as wastewater treatment.

Augment is an investment vehicle majority owned by Russian billionaire Viktor Kharitonin, and comprises assets in the pharmaceutical and other sectors in Russia, Europe and the UK.

Mondi’s paper business in Russia accounts for about a fifth of the group’s core profit, but it is looking to leave the country amid an exodus of firms due to Moscow’s invasion of Ukraine.

Mondi said its board remains committed to selling Syktyvkar and will “continue to assess all alternative divestment options”.

The deal is not connected to Mondi’s sale of three Russian packaging converting operations to the Gotek Group that was announced in December, and is still in progress.