Schneider Electric sold the Russian business to the management team

Instead of Schneider Electric leaving RUSSIA, Systeme Electric was created. it will continue to produce sockets, switches and systems for electrical substations,

Russian management bought out the business of the French Schneider Electric in Russia and Belarus, Alexei Kashaev, who until recently was the president of Schneider Electric in Russia and the CIS, told RBC. On Monday, July 4, the parent company also announced this. Closing the deal will require regulatory approvals, she said in a statement.

According to Kashaev, the new company will be called Systeme Electric. The Potential plants in Kozmodemyansk (produces sockets and switches), ElectroMonoblock in the Leningrad Region (SEZEM, manufactures and adapts medium and low voltage electrical equipment, industrial automation equipment to local requirements), St. Petersburg STC Mekhanotronika (develops and manufactures the intellectual part for electrical substations), as well as the Moscow Engineering and Service Center and the Kazan Innovation Center.

Schneider Electric manufactures equipment for energy sub-complexes, industrial enterprises, various construction sites and data centers. Revenue in 2021 - € 29 billion, net profit - € 3.2 billion. Capitalization on the Paris Stock Exchange - more than € 64 billion.

Schneider Electric to sell Russian assets to management Business

The company established an accredited representative office in Russia in 1993, but implemented its first project back in the USSR: in 1974, at the Samara Oil Refinery. In the 1980s, it supplied electrical equipment for compressor stations of the Urengoy-Pomary-Uzhgorod main EXPORT gas pipeline. Among the company's major clients are now almost all oil and gas and metallurgical companies, the largest developers and developers of commercial real estate, companies from the energy sector and housing and communal services: Rosseti, NOVATEK, Gazprom, Rosatom, Magnitogorsk Iron and Steel Works, Sibur Holding, PIK , "Capital Group", etc.

After the start of a special military operation, Schneider Electric announced the suspension of the supply of its products and new investments in Russia and Belarus, and at the end of April, its intention to sell the local business to a top management team. The report then indicated that Russia accounts for approximately 2% of Schneider Electric sales (based on the size of total revenue in 2021, this is € 580 million). The company itself intends to write off €300 million of the book value after the sale of the Russian business.

According to SPARK, the revenue of the main legal entity of the company JSC "Schneider Electric" in 2021 amounted to 43.6 billion rubles, net profit - 3.2 billion rubles.

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The exact composition of the buyers and the terms of the deal were not disclosed. According to the investment strategist of Arikacapital Sergey Suverov, based on market multiples, which for such companies amount to one revenue, the value of Russian business can be 25-40 billion rubles. “But, most likely, the company will be sold at a discount to the market valuation, since it was desirable for the seller to close the deal in a short time,” Suverov said. “Such businesses are now often sold at a large discount from prices at the end of 2021, so it’s very difficult to say [how much the company could have cost management], agrees the partner, HEAD of the group for working with technology and media companies at Business Solutions and Technologies ( DRT) Anton Shulga. - For foreigners who are faced with the need to work "in the regime of sanctions", this is one cost,sanctions do not interfere at all) the cost may be completely different. The difference can be up to 10 times.”

How will the new company work?

Kashaev said that under the terms of the agreement, Systeme Electric will not be able to import Schneider Electric equipment, but will service the previously installed equipment and continue local production. So far, about 50% of Schneider Electric's revenue in Russia came from equipment imports, and the rest came from sales of products manufactured at local factories and services, he noted. According to the head of Systeme Electric, the service fee "will not be able to cover the shortfall in import revenues," but the company does not give an accurate forecast for indicators. Part of the products manufactured in Russia was exported to the CIS and Eastern Europe, but this was an insignificant share, and after reformatting the business, a number of markets will not be available, Kashaev said. “It will be a completely different business model,” he said.

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The head of Systeme Electric specified that his company does not plan to engage in parallel imports to Russia (import without the permission of the copyright holder) of Schneider Electric equipment, but admitted that other market participants could do this. At the same time, he believes that the global Schneider Electric "absolutely will not encourage parallel imports to Russia of products prohibited by sanctions and will make every effort through export control procedures so that such products do not enter the country." When asked whether Systeme Electric would provide warranty and service maintenance for Schneider Electric equipment imported by third parties, Kashaev replied that "the new company will provide maintenance services only for already installed Schneider Electric equipment."

The main part of the Schneider Electric employees in Russia, according to Alexei Kashaev, worked in production, and the new company does not plan to cut them. The issue of retaining staff at the Moscow headquarters and the remaining 17 offices in Russia and Belarus will depend on how the size of the business changes, what revenue and profitability the company will receive in 2022. At the same time, he said that as part of leaving Russia, Schneider Electric offered some of the employees to move to other countries and continue working in a global company, and about 50 people out of 3.5 thousand have already accepted this offer (including the staff at the factories) .

According to Kashaev, in the next six to eight months the company will analyze how to develop further, no large investment projects are planned. “Now the main task is to stabilize the business, supply equipment for a number of key projects and prepare a platform for launching new products and solutions. The creation of a new company is an opportunity to continue working in the market. On the one hand, it will be more difficult because there will no longer be the global support that we are used to. But this also opens up new opportunities: local companies are more independent and flexible in decision-making, have greater speed,” he calculates. Among the new opportunities for the company that have opened up on the market, Kashaev noted the need to modernize electrical networks, develop data centers, import substitution of a large number of different industries. “Within a year and a half, the situation for all market players will not be easy, it will test everyone's strength, and on the other hand, the market will actively rebuild, this process has already begun. Their success depends on how professionally companies show themselves and adapt. You have to work very hard,” he concluded.