Murat Aliev’s Bonum Capital combats climate change with Russian forestry sector deal

Russia is home to a fifth of the planet’s forests, more than any other country in the world by a comfortable margin. But the country’s share in the global forest products market is just 4%, according to the UN – writes Colin Stevens

International investment group Bonum Capital believes that this has the potential to change, and is brokering a deal worth over half a billion dollars, which will make it a large stakeholder in a land-rich publically traded Russian forestry company Segezha Group, founder and sole owner of Bonum Capital Murat Aliev accounced on October 11th.

“In line with global trends around sustainability and combating climate change, we are strong believers in the outlook for the global forestry sector and see enormous potential for investment in Russian forestry assets, where improvements to operational efficiency and sector consolidation are creating significant opportunities for higher returns and growth of shareholder value.” Murat Aliev, founder and owner of Bonum Capital, told EU Reporter.

Bonum’s deal with Segezha will see the investment group sell Inter Forest Rus – a holding company comprised of high-quality assets and substantial forestry resources that was established to consolidate quality assets in the sector – to Segezha, expanding its existing resource base by half again. As a result of the deal, Segezha will own 16.1mn hectares of forest under long-term lease, five times more than any of its largest publicly traded peers.

The deal value is in the region of $515mn. It is expected that this amount will be split in three parts: $238mn will be applied towards restructuring and consolidation costs in respect of the target assets; $205mn will be used to retire some of the target group’s debt; and Bonum Capital will take home approximately $82mn, $68mn of which is payable in instalments across a period of four years post-completion subject to the satisfaction of certain payment conditions.

Bonum also will invest $150mn in additional shares in Segezha, bought from Sistema – Segezha’s founder and majority shareholder.

“In the current context of global trends around sustainability and combating climate change, we are strong believers in the outlook for the global forestry sector and see huge potential for investment in Russian forest assets, where improvements to operating efficiency and sectoral consolidation are creating huge opportunities for higher returns and growth of shareholder value.” said Aliev.

Separately, Bonum Capital has entered into a sale and purchase agreement to acquire a stake in Segezha Group from PJSFC Sistema, a publicly traded Russian investment company and the majority shareholder in Segezha Group, for the ruble equivalent of $150 million. As a result, Bonum Capital will increase its shareholding and become Segezha Group’s second largest shareholder with a stake of approximately 13%. The transaction is also expected to close in 1Q 2022 and will be funded with the proceeds from the Inter Forest sale and bank financing.

Bonum has been making considerable inroads into the forestry sector over the past year. It participated in Segezha’s IPO in April 2021, and also consolidated Inter Forest Rus, the holding company, which they are selling to Segezha. 

Bonum Capital is an investment group founded in 2013 in Moscow. The company’s founder and sole owner is Murat Aliev.

It invests in various assets including international public markets, private equity, venture capital and real estate in Russia. The company’s primary business is proprietary investing on public markets with focus on long-term concentrated positions.

Bonum Capital has been involved in all major recent CIS IPOs, including OZON, Kaspi.kz, Segezha Group, Fix Price and United Medical Group (EMC). Bonum Capital has expertise in purchasing and developing distressed assets with high potential for value growth, including through synergies with other assets of industry players.

Inter Forest Rus comprises 24 companies from different segments of the timber industry, and includes a vast swathe of forested land in Siberia as well as 5,000 employees, new mills and a fleet of boats for transporting resources by river.

Inter Forest Rus was created as a holding company to consolidate quality assets in the forest industry. Inter Forest Rus currently comprises the core assets of LDK Igirma, Trans-Sibirskaya Lesnaya Kompaniya and Priangarsky LPK, as well as over 20 companies in segments including forest ownership, logistics and operations.

It has one of the largest annual allowable cuts in Russia (88% softwood) at approximately 10.9 million cubic meters on a consolidated basis. Its production capacity is 1.5 million cubic meters of sawn timber at four sawmills, 35,000 cubic meters of plywood and 170,000 tons of pellets.

 Its main markets include China, Japan, the EU and Egypt, as well as Russia and other CIS countries. The company employs about 5,000 people. OIBDA for 2021 is expected to be approximately RUB 11 billion.

Bonum also acquired the rights for a number of companies in the forestry sector from Trust Bank in 2020 at auction. The deal therefore marks a considerable consolidation in the Russian forestry market, with Segezha now boasting one of the largest allowable cuts of any publicly listed forestry company in the world, at 23.6mn cubic metres.

“Our long-term interests in the sector are now focused on Segezha, which with its outstanding management team and a proven and profitable business model is well positioned to take Russia’s forestry industry to a new global level. As a result of this transaction, we will significantly increase our stake in Segezha Group and become its second-largest shareholder. We believe that Segezha has the potential to become one of the biggest success stories in Russia’s capital markets.” said Aliev.

Bonum Capital invests in several asset classes including international public markets, private equity, venture capital and Russian real estate. The company’s core business is investing on public markets.

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