A deal between investment group Bonum Capital and Russian forestry major Segezha will create the largest forestry assets holder in Russia, with five times more land than its closest public peers. The M&A will also make Segezha the second largest sawn timber manufacturer in Europe, bringing it into the list of top 10 global players in the industry.
Bonum Capital, the company which orchestrated the deal, is a big player in the Russian equity market. It has participated in the flurry of Russian IPOs on Moscow’s exchange throughout 2021, including Segezha’s IPO in April.
The deal, which could be finalised late this year or early next, will see Segezha acquire the assets of Inter Forest Rus, a holding company valued at $515 million with extensive forest resources and high-quality manufacturing assets. The assets acquired by Segezha will expand its existing resource base by half again, bringing a total of 16 million hectares of forest under its stewardship. Further capacity will be provided by the infrastructure acquired in the deal, which includes two new pulp mills, two new sawmills and a plywood mill as well as a fleet of boats for river transportation.
The assets acquired will accelerate the creation of a cluster of timber enterprises in Siberia – the “Segezha East” project that complements Segezha’s other cluster in northwest Russia – and enable the company to easily ship its products to clients in fast-growing Asian markets as well as Europe, across the CIS and elsewhere. The deal will also bring the company an additional 5,000 employees.
Segezha Group’s President, Mikhail Shamolin, said: “The ability of Segezha Group to make a deal of this size demonstrates that it is the only public company in the Russian market in a strong enough position to consolidate Russia’s forestry assets. Our wealth of experience in integrating assets into an effective business model facilitated this, as did our history of investing in the technological transformation of assets.”
He also stressed that the deal was an important step towards the fulfilment of the promises made to investors by the group during its IPO earlier this year. Forest resources are the most valuable component of any business in the sector, with vertically integrated holdings able to command a premium from investors. Meanwhile, Segezha’s high level of self-sufficiency in its key raw input material – wood – offers valuable protection against global raw materials fluctuations.
Bonum Capital, the investment group which instigated the deal, will invest $150 million in buying additional shares in Segezha from Sistema, Segezha’s founder and majority shareholder. This will increase Bonum’s stake in the company to around 13.3%.
Bonum Capital is an international investment firm which invests in a range of assets, from venture capital and private equity to Russian real estate. According to its website, the firm specialises in investing on public markets. The company also has an expertise in acquiring distressed assets, cleaning them up, and packaging them alongside the assets of other industry players in order to grow their value.
Bonum Capital has participated in a series of IPOs, such as those of e-commerce company Ozon and Kazakh banking and fintech firm Kaspi.kz. After Bonum invested in Segezha’s IPO, this latest transaction represents a doubling down by a significant Russian investor who believes in the strong growth prospects of the forest products sector.
Founder and owner of Bonum Capital, Murat Aliev, said: “We consider that only Segezha, with its effective management and proven business model, is able to act as a consolidator of the sector and bring the Russian forestry industry to a new global scale. We have long-term interests in the sector, and they are now concentrated in Segezha. As a result of this deal, we will considerably increase our stake in the company and become the second largest shareholder. We believe that Segezha has the potential to become one of the most successful stories on the Russian stock market.”