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By John Helmer, Moscow

If you’re feeling peckish, but the price of fish is too high to swallow, whom do you call?

Gennady Timchenko (right image), that’s who – the man who has settled with several English newspapers out of court that he’s not a friend of Prime Minister Vladimir Putin and benefits commercially in no way at all from his political and administrative contacts with people like Deputy Prime Minister Igor Sechin.

So if Russian Sea Group, owned by Maxim Vorobiev (aka Vorobyov – left image), has been suffering financially because the Russian fishing fleet was delivering less fish at growing prices, whom did Vorobiev call to discuss state subsidies and a higher fish catch quota, more fish supplies, lower prices, and higher revenues and profits to service his debts — why, the uninfluential and unassuming Timchenko, that’s who.

Last year, according to Renaissance Capital analyst of the fish industry, Ulyana Lenvalskaya, Russian Sea “suffered considerably from a reduced fish supply and very high input fish prices, which subsequently translated into reduced consumer demand (as prices were too high for consumers).. ” The latest company balance-sheet — released on April 24 but withheld from circulation to readers in the US, Canada, Australia, Japan and South Africa — shows that RSG’s revenues in 2010 came to Rb17.2 billion ($564 million), down 0.5% on the year before. Earnings (Ebitda) fell dramatically into the red, going from a positive Rb1.4 billion ($46.3 million) in 2009 to a negative Rb484 million ($16 million) in 2010. The bottom-line was also red – a loss of Rb836.2 million ($27.4 million), compared with a prior-year profit of Rb1.4 billion ($46.3 million). Net debt at the start of this year was $115 million. How much personal debt of Vorobiev’s may have been pledged through his 75% shareholding in the company to support the sinking ship isn’t known.

The chief executive, Dmitry Dangauer, said RSG was taking emergency measures, including an expansion of “its network of suppliers, increasing purchases of raw fish, allowing us to almost fully cover our requirements for raw materials in the second half of the year.” Also according to Dangauer, the company accelerated its fish farming plans. “We continue development of our aquaculture business. We have received titles for farming at 9 sites in Barentz Sea and Karelia. We expect to complete construction of the fish processing plant in Karelia already in summer of 2011, which will allow us to produce high quality trout fillets, both chilled and frozen.”

Lenvalskaya of RenCap reports that for the time being, fish farming makes a minuscule contribution to RSG’s sales revenues – less than half of 1% of revenues, according to the latest financial data for the first quarter of this year; and at 14,000 tonnes, less than 0.3% of the volume of fish sold by RSG in the three months to March 31.

The state’s quotas for the wild catch affect, Lenvalskaya also says, less than half of RSG’s revenues, while imported red fish, principally salmon from Norway, accounts for over 50%. Timchenko’s Scandinavian ties have been reported publicly to be in Finland, where he has owned and operated several businesses including a small airline; but he hasn’t been reported to have investments in the Norwegian red fish sector.

In the first quarter, RSG reports that revenues were Rb4.5 billion, up 15% on the same period of 2010, with chilled and frozen fish sales up 14% to Rb3.4 billion, and ready-to-eat fish sales up 18% to Rb1 billion. So what reason can there have been for Vorobiev to sell most of his shares to Timchenko on June 28?

Here is RSG’s announcement of the deal, including the rationale announced publicly by Volga Resources, Timchenko’s vehicle which is registered in Luxembourg and displays its name-plate at Timchenko’s office in Geneva:

OJSC «Russian Sea Group» (the «Company» or the «Group»), one of Russia’s leading consumer food companies, announces that it has been notified of a change in the ownership of its major shareholder. RS Group, owner of Corsico Limited, the Group’s major shareholder, has formed a strategic partnership with the Luxembourg-based investment fund, Volga Resources, to invest into Russia Sea Group.

RS Group and Volga Resources intend to establish a joint company, which will own 60.936% of the Russian Sea Group. 50% of shares in the new company will be owned by RS Group, controlled by Maxim Vorobiev and 50% by the wholly-owned subsidiary of Volga Resources.

The parties expect the deal to be completed within the next two months.

Maxim Vorobiev, owner of RS Group, commenting on the future partnership with Volga Resources, said, “We see tremendous potential in our partnership for the strategic development of the Russian Sea Group. Our new partner’s international business experience as well as its financial strength will contribute to rapid, profitable and sustainable growth of the Group. I will continue to be actively involved in the Company, and as Chairman, will remain in charge of the overall development of the Group”.

Chlodwig Reuter, Chairman of Volga Resources, added, “The food industry, in particular the fish segment, as well as fast moving consumer goods (FMCG) are young and dynamic sectors of the Russian economy and offer great growth potential. Russian Sea Group is a well run company with a strong and proven management team. We are confident that the management, together with RS Group and Volga Resources, will successfully develop the business and take it to the next level. This acquisition allows us to diversify away from our more traditional sectors of oil & gas. We will continue to look for other opportunities that are undervalued and offer attractive and sustainable investment returns.”

CEO of the Russian Sea Group, Dmitry Dangauer, said, “We will be pleased to welcome a new shareholder to the Company. Volga Resources will bring new expertise, strengthen corporate governance and contribute to the further development of the Company. The company’s management is ready to meet and exceed the goals and objectives of all our shareholders.”

What has happened is that out of his 75% stake in RSG, Vorobiev sold Timchenko’s Volga Resources one-half of the new joint venture company they have formed with 60.94% of RSG. That leaves Vorobiev with a tad more than 14% of RSG, Timchenko with a tad more than 30%.

Asked why Vorobiev sold to Timchenko, Lenvalskaya said: “we have no understanding of this.” Asked what advantage Timchenko may present to RSG, she said that he may be of assistance in persuading the Russian government to enlarge subsidies to fish farming, as funding for import substitution in the meat (pork and poultry) sector winds down. In addition, she noted that if the State Fisheries Committee (Goskomryba, GKR) were to increase the wild fish catch quota in the Russian fareast, “obviously that can have an effect [on RSG’s bottom-line.”

Last week, something fresh landed in the news with Timchenko’s apparent fingerprint reported to be on it. According to the Russian press claims, the state-owned Arkhangelsk Trawler Fleet (ATF), the oldest fishing fleet in northern Russia and one of the largest, is to be privatized.

This isn’t the first time. In 2005, the Arkhangelsk regional government reportedly pulled ATF back from bankruptcy with a reorganization plan. In November of last year, the federal stake in ATF was listed as for sale by the Ministry of Economic Development in Moscow. Now, according to Moscow industry reports, the takeover contender for the sale of the federal shareholding is RSG.

ATF is the principal fishing fleet supplying Russian Sea, so an upstream move to buy control of the fleet from the government makes commercial sense, but may also require help. Timchenko appears to be providing that, according to Moscow newspapers, as he has met with the state property agency officials in charge of the shareholding sale. Timchenko’s interests in high seas shipping have been the subject of detailed testimony in the UK High Court recently. He was reportedly a candidate for the privatization of a stake in Sovcomflot, the state-owned Russian oil tanker company until that was postponed following UK court rulings against the company in last December and this March.

There ought to be nothing fishy, in the figurative sense, if Timchenko is, as the public release from Volga Resources suggests, diversifying out of oil shipping into fishing and fish farming.

But did he visit the State Property Fund officials recently to discuss the sale of ATF? Alexander Komarov and Arina Lazareva, spokesmen for the agency, do not respond to requests for confirmation or comment.

Mila Rotynskikh, spokesman for RSG, refuses to comment on the Timchenko acquisition of Vorobiev’s shareholding, or the RSG interest in buying ATF. Yury Nikulin, chief executive of ATF and Nikolai Kovalenko, ATF’s commercial director, respond to questions with a silence as profound as Davy’s Locker.

Moscow maritime analyst Alexei Bezborodov speculates that the new partnership of Vorobiev and Timchenko may be seeking Kremlin support for lifting the fish catch quotas of ATF, adding significantly to RSG’s revenues.

Another maritime source speculates that the alliance of Vorobiev and Timchenko is backed by the head of the State Fisheries Committee, Andrei Krainy. In April, he and the Prime Minister met, and according to published record, they talked about how to protect amateur and sport Fishermen from commercial trawlers like those of ATF.

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