Alfa Group


Alfa Group Consortium is a Russian international privately owned investment groups, with interests in oil and gas, commercial and investment banking, asset management, insurance, retail trade, telecommunications, water utilities and special situation investments.
The group was founded in 1989 as Alfa-Eco by Israeli-Russian businessman Mikhail Fridman together with US/ businessman Anatoly Potik. . Later German Khan, Alexei Kuzmichov, Alexander Kushev, and several other partners joined.
As a holding company, in the financial year ending December 2010 Alfa Group had total assets of US$59,900 million, total equity of US$21,790 million and profit for the financial year of US$2,810 million. Return on shareholders' equity were recorded at 13.4%.
In April 2012, Altimo sold its entire 25.1% stake in MegaFon to a private investor and to MegaFon for US $5.2 bln.

Ownership structure and joint ventures

Its central holding company is located in Gibraltar and under the direction of Franz Wolf, the son of Markus Wolf.
Alfa Group has ownership stakes in the following companies and joint ventures:
  • ABH Holdings S.A. — a private investment holding company headquartered in Luxembourg with investments in banking groups across the CIS and Europe, which includes:
  • * ABH Financial Limited, operates mainly through Alfa-Bank — wholly owned commercial and investment bank and one of Russia's largest, private banks,
  • * Alfa-Bank, one of the ten largest Ukrainian banks,
  • * Amsterdam Trade Bank in the Netherlands — a subsidiary of Alfa-Bank,
  • * Alfa-Bank,
  • * Alfa-Bank,
  • * Alfa Capital Markets, а financial subsidiary in Cyprus.
  • AlfaStrakhovanie Group, one of the largest Russian insurers with a diversified portfolio of comprehensive business and retail insurance products.
  • X5 Group, the largest food retail operator in Russia in terms of sales. Operates Pyaterochka, one of the largest discount grocery retailers in Russia in terms of sales, Perekrestok, which runs a leading chain of supermarkets in Russia, and Karusel, one of the largest hypermarket chains in Russia. Listed on London Stock Exchange under the symbol FIVE. Alfa Group owns 47.86% of the company, 19.85% stake belongs to the founders of Pyaterochka.
  • TNK-BP, one of the top ten privately owned oil companies in the world in terms of crude oil production. The company was formed in 2003 as a result of the merger of BP's Russian oil and gas assets and the oil and gas assets of Alfa Group, Access Industries and Renova Group. BP and AAR each own 50% of TNK-BP. In 2013, the company was acquired by Rosneft, with Alfa Group's cut almost fourteen billion.
  • VimpelCom, one of the world's largest groups of integrated telecommunications services operators. Listed on the New York Stock Exchange under the symbol VIP. Alfa through Altimo owns 24.998%, Norwegian telco Telenor owns 25.007% of shares, and 29.626% stake is owned by Weather Investments of Sawiris family.
  • Turkcell, Turkey's largest mobile operator. Alfa Group controls 13.22% stake in the company with Swedish telco TeliaSonera.
  • Rosvodokanal Group, a leading private operator of water utilities in Russia and CIS.
  • A1 Group, former Alfa-Eco, wholly owned special situations investment company.
  • LetterOne Group, an investment vehicle specialising in energy, technology and private equity.
  • Alfa Capital Management, an asset management company, which serves Russian as well as international institutional and private clients.
  • IDS Borjomi International, the manufacturer of naturally carbonated mineral water from springs in the Borjomi Gorge of central Georgia.
There are a number of current disputes regarding Alfa's ownership of various stakes in telecoms companies.
Alfa Group is notably involved in a commercial dispute with Norwegian mobile phone company Telenor over the control of Russian company Vimpelcom

Legal disputes

Over 10 years, Alfa Group has found itself in legal battle with business partners from Canada, Great Britain, Sweden, Norway, Turkey and Indonesia. Federal Reserve executive Paul Volcker has accused Alfa Group of violation of the UN sanctions against Iraq during Saddam Hussein's regime, and for pressure exercised against KPMG during their spring 2005 investigation of a Bermuda registered, Russian telecom company, Ipoc International. To counter the Bermuda government supported audit by KPMG of Ipoc International, Alfa Group hired Diligence, founded by Richard Burt and Lord Powell of Bayswater with Diligence Europe headed by Michael Howard. Diligence began its Project Yucca to infiltrate KPMG. The Bermuda government accused Diligence of impersonating secret service personnel to obtain KPMG information about KPMG's audit of IPOC International Growth Fund Ltd. The Bermuda government accused Alfa Group's Ipoc International of money laundering. Alfa Group stated that Diligence was not hired by Alfa Group but by BGR which was founded by Haley Barbour. BGR had worked for Alfa Group's telecom Altimo. Project Yucca ended on October 18, 2005, when KPMG received papers from Project Yucca. During Project Yucca, the shareholders of Diligence were CEO Nick Day who was a former British agent, Chairman of Diligence Richard Burt who was a former United States ambassador to Germany under Reagan, the Exxel Group which is a Buenos Aires private equity firm, and Edward Mathias from Carlyle Group which is a private equity company from Washington, D.C.

Dispute with NoreX and BP

Alfa Group's legal disputes with BP date back to 1991, when the Canadian oil company Norex represented a newly formed, Russian-Canadian joint venture in Siberia's oil industry, operating the marginal Chernogor oil-fields close to Khanty-Mansijsk. With the Russian company Chernogorneft, the Canadian company entered into a 60% ownership in the joint-venture Yugraneft. Later on, NoreX increased their stake to 97,64%, and in September 1998 Chernogorneft was filed with bankruptcy by the Tyumen Oil Company. The arbitration court of Khanty-Mansinsk proclaimed for Chernegorneft a new chief executive officer, with a background from Alfa Group. The main owner of Chernogorneft was BP, via their holding company Sidanko.
TNK gained control over 60% of Chernogorneft's debts, and the debt of US$35 million held by EBRD was reduced to US$9 million by Khanty-Mansijsk arbitration court on 30 July 1999. Thereby, TNK controlled 60% of the debt claims, and according to NoreX the Alfa Group took over Chernogorneft's oil sales below market prices. Resulting in a forced sell-out of the company, Sidanko was rejected from taking part in auctions, and remaining bidders were legally restrained from offering more than US$200 million for Chernegorneft - a mere fifth of its assumed value. On 26 November 1999, TNK took over all of Chernorogneft for US$172 million.
Letters of protest from prime minister Tony Blair to president Vladimir Putin helped little, the legally BP-owned company was forcibly sold to TNK below market price. TNK also got approval from the Khanty-Mansijsk arbitration court to take over Chernogorneft's stakes in two joint ventures, in spite of protests from venture partners Norex and Occidental Petroleum. BP fought on for years to retrieve its rightful ownership in Chernogorneft, and in August 2001 this got its first legal approval.
In 2000, according to NoreX, TNK started to undermine Yugraneft's oil transports through the national semi-monopolistic pipeline system Transneft. On 11 April and 26 June 2001, TNK again got two legal victories in the Khanty-Mansijsk arbitration court, first through a reversal of earlier regulation regarding Chernogorneft's stock capital in the joint-venture, and thereafter through a nullification of the voting powers in 497,142 out of the 600,000 shares held by NoreX. At an extraordinary annual assembly of Yugraneft on 28 June, NoreX' candidate for the CEO position was elected, but the day after TNK's security executive and 20 heavily armed guards appeared at the Yugraneft office with a false annual assembly protocol, installing Mr. A. Berman as CEO of Yugraneft. In June 2001, Yugraneft's owner Alex Rotzang contended that two British Virgin Islands shell companies Quenon investments limited and Shapburg limited which are closely associated with Mikhail Fridman and Alfa Group illegally gained control of Yugraneft through an armed seizure of Yugraneft's offices. In 1998, both Quenon and Shapburg formed the Luxembourg based Compagnie Financiere pour l'Atlantique du Nord which changed its name to Gaumur Holding in March 2000 and was entirely controlled by the Baugur Group of Iceland. Both Shapburg limited and the Gibraltar based AB Holdings limited, which is owned by Mikhail Fridman, co-founded the Alfa Bank subsidiary Alfa finance holdings SA based in Luxembourg. In March 2000, Alfa finance holdings SA succeeded AB Holdings limited as the parent holding of Alfa Bank Group. Norex' demands for investigation and nullification remained fruitless. Norex brought the case before a U.S. Federal court in New York in February 2002, demanding US$1.5 bn in redemption from TNK and Alfa Group.
The year after, BP and Alfa Group merged all their oil and gas interests into a 50/50 joint venture, in spite of BP's legal and financial losses in the Yugraneft disputes since 1999. The new venture controlled both Sidanko og TNK from 11 February 2003. The merger implied that NoreX' stake of 97% in Yugraneft come under control of Alfa Group and BP. NoreX, thereby, saw their possessions dwindle and transferred partly to BP, and appealed for copies of BP documents before a US court. Jones Day represented its client Alfa-Access-Renova of Len Blavatnik, Mikhail Fridman, and Viktor Vekselberg in United States court. In 2004 the U.S. Supreme Court sustained Norex' right to appeal, but at a lower level the legal dispute went on for years, with only gradual victories for NoreX.
''For a summary of the battle of control over TNK, BP, see: TNK-BP.''