Business 8 November 2021

Alfa Group circles in conflict over confectionery empire

The death of businessman Boris Alexandrov last year triggered a battle for control of his confectionery company, Rostagrokompleks. Alexandrov’s former partner, Yuri Izachik, finally went public Tuesday with his version of how the corporate conflict over Rostagrokompleks has unfolded. Izachik, who currently lives in Kansas, was put on an international wanted list last month in connection with the dispute.

  • Shortly before his death, Alexandrov transferred the rights to the group’s two key trademarks — Rostagroexport and B.Y.Alexandrov — to his daughter, Yekaterina. However, Izachik held 100 percent of the shares in Rostagrokompleks, which is Rostagroexport’s main operating company, and the owner of the B.Y.Alexandrov cheese factory. After Alexandrov’s death, Izachik transferred 85 percent of his shares to five senior managers in the company.
  • The bedrock of the confectionery empire at stake is the manufacture of chocolate coated curd snacks — ‘syrki’ in Russian — an iconic Soviet product that was one of the few widely available sweet treats under Communism, and a staple of school dinners and kindergarten lunches.
  • Izachik’s decision to transfer 85 percent of his shares was in line with Alexandrov’s wishes, according to a source who has followed the conflict. Alexandrov apparently said that “all the company’s assets should be consolidated and divided among key managers and heirs after his death.” That’s what Izachik was doing: after his distribution of shares, each of the five top managers would have had 17 percent of the assets.
  • However, Izachik unexpectedly went to court last month to demand this agreement be torn up and the dispersal of 85 percent of Rostagrokompleks rendered invalid. At about the same time, it emerged that A1, the investment division of Alfa Group, owned by billionaires Mikhail Fridman, German Khan and Alexei Kuzmichev, had entered the fray, and was offering to buy out all the co-owners of Rostagrokompleks. Some speculated that A1 is looking to gradually consolidate the business, and then sell it on to a strategic investor.
  • Izachik, who currently lives in the U.S. state of Kansas, broke his silence Tuesday in an interview to Forbes magazine. He told the reporter that he gave senior management 85 percent of Rostagrokompleks in the expectation that 15 percent of all the brand’s companies would come to him. “I gave them 85 percent of my 100 percent but they didn’t keep their promises: their share in the other companies remained with them,” he said.
  • Asked about the timing of his lawsuit to contest the share handover, Izachik said that it was filed before A1 got involved. Izachik believes A1’s offer to be reasonable — paying him, five senior managers and four of Alexandrov’s heirs $5 million each for the whole business. He said he is willing to “discuss and negotiate”, but pointed out that there is no agreement yet. Izachik’s lawyer Svetlana Maltseva told The Bell that her client decided to give up 85 percent of the shares in Rostagrokompleks at a time when he was depressed and the financial condition of the company was described to him as ‘terrible’.
  • The criminal case against Izachik (as a result of which his name was added to an international wanted list) was based on a claim filed with police by the senior managers with whom he is in conflict. The managers maintain Izachik is trying to force them to invalidate the original share handover.
  • Izachik has no plans to return to Russia. According to his lawyer, his age and health makes flying inadvisable during the pandemic. “One need only recall that… Boris Alexandrov died of coronavirus after flying to Russia,” Maltseva said.

Why the world should care: In Russia, it’s almost inevitable that the death of the charismatic founder of a successful company will lead to a bitter corporate conflict. A similar legacy battle over the fate of cosmetics company Natura Siberica has been underway for almost a year.