The deal, which has taken the two companies months to complete, will see a $100m cash investment and will also address CEDC’s short-term financial obligations by Russian Standard buying $210m of its debt.
Russian Standard Corporation’s share of CEDC currently stands at 9.9% following December’s $25.35m share purchase, but will rise to 28% next year following the terms of the agreement.
The deal will see Russian Standard purchase a combination of newly issued shares of CEDC common stock and exchangeable notes (exchangeable into common shares of CEDC upon shareholder approval) to be issued by CEDC.
The first stage of the transaction, which is due for completion in the next few days, will see Russian Standard Corporation’s share of CEDC rise to 16%.
Roustam Tariko, founder and chairman of Russian Standard Corporation, currently has one seat on the board of CEDC but could increase this to three by the time the deal is concluded.
Tariko said: “While the global spirits market is at the final stage of its consolidation, the process in Russia is just beginning. As a result, customers will be offered an unparalleled choice of quality global alcohol brands and the market should become more transparent with fewer players.
“Russian Standard Corporation’s partnership with CEDC should provide both companies with a number of synergies: not only should we become a strong vodka market player across all categories and a leading importer of alcohol beverages offering one of the most significant portfolios of premium brands in Russia and Poland but we also should have a very effective production and distribution infrastructure in the near future, which should increase our competitiveness on global markets.”
William Carey, president and chief executive officer of CEDC, said: “We anticipate further discussions on the combination of our Russian businesses as well as other synergies that can be obtained from this strategic relationship.
“Our partnership with Roustam Tariko and Roust Trading, will not only benefit CEDC from the financial and business side but with Tariko’s vast experience in the Russian spirits market, he will represent valuable support for management and the board in strengthening CEDC’s position in the Russian market, as well as in international markets.”