Continental may get as little as £70 million for Russian business

When Continental first discussed setting up a plant in Russia back in 2011, it spoke of an investment of around 220 million euros. According to sources within Russia, the German company may only recover a fraction of this amount when divesting its local operation to S8 Capital.

Moscow-based newspaper Kommersant states that the transaction is valued at 7 to 10 billion roubles, or just 80 million to 114 million euros (£70 million to £100 million). This figure is in line with the “impaired assets of around 87 million euros” that Continental reported in connection with its business activity in Russia on 8 March 2023, the same day that chief executive officer Nikolai Setzer confirmed that the sale of business operations in Russia, including the tyre plant in Kaluga, was “already at an advanced stage.”

Kommersant writes that a Russian government commission and the country’s Federal Antimonopoly Service both approved a deal for Continental to sell its Russian assets to S8 Capital several weeks ago. It then explains that the deal’s closure is now being held up by the Bureau of Industry and Security (BIS), an agency of the United States Department of Commerce.

Restrictions on certain technologies

Continental applied to BIS for an export license, which is generally issued for transactions involving goods subject to export control as well as those carried out in the interests of the Russia’s (or Belarus’s) government or defence sector. Kommersant comments that Continental may have sought a license for items related to its operation in Kaluga, such as a particular manufacturing technology or software, which could be subject to US export controls.

Should the BIS grant a license and the transaction close successfully, it appears S8 Capital is getting something of a bargain. For a sale price that may be less than one third of the 285 million euros Tatneft paid Nokian Tyres in March, S8 Capital will be the new owner of the LLC Continental Tires Rus trading company and LLC Continental Kaluga production facility, which opened in 2013 and has an annual capacity of four million tyres, with the potential for expansion to 16 million tyres a year. The former Nokian tyre plant in Vsevolozhsk opened in 2005 and can produce 17 million tyres per annum.