TUI has Russian oligarch image problem

TUI, the world’s largest tour operator, may have a Russian oligarch problem, as its main shareholder Alexey Mordashov met with Russia’s President Vladimir Putin at the Kremlin last week amid the invasion of Ukraine.

With the West hitting Russia with sanctions following its invasion of Ukraine, TUI will have to address the matter, as having a Putin ally on its supervisory board presents a major optics problem, if not potential sanctions.

According to Bloomberg, the EU is discussing sanctioning Mordashov and other Russian oligarchs among high-profile individuals.

Mordashov wields 34% of TUI Group’s voting power through control of a Cyprus-based company and has been a member of TUI’s supervisory board, sitting on its strategy, nomination, and presiding committees since 2016.

It is a potential hurdle as despite TUI being a German company, its stock is listed on the German and London stock exchanges.

As such, Unifirm Ltd., the Mordashov-owned company that’s the source of his 34% voting clout in TUI, “is considered a controlling shareholder” under UK listing rules.

Germany doesn’t characterize the stake as such.

Mordashov’s net worth is about $23 bln, after losing $4.2 bln last week when Moscow’s stock index plunged.

He is also the chairman of the board and majority owner of Russia’s largest steel and mining company, Severstal, which supplies the steel to construct light tanks for the Russian army.

Another company he controls, and where he is board chairman, PJSC Power Machines, a Russian energy equipment company, was hit with US Treasury sanctions in 2018 because of Russia’s occupation of Crimea.

The Russian oligarch has not yet been personally or corporately targeted in the latest round of European Union, UK or US economic sanctions over the Russian invasion of Ukraine, but it could happen.

TUI Group CEO Fritz Joussen posted a letter to employees on LinkedIn, saying if Mordashov gets sanctioned, it “will not have lasting negative consequences for us as a company.”

Joussen acknowledged that some employees have asked about the shareholder.