CT-based Otis Elevator sells Russia business unit in response to Ukraine conflict – mySA

As the war in Ukraine continues, Otis Elevator said Wednesday it sold its operations in Russia to a company based in that country.

Terms of the deal with Ice Development, which Farmington-based Otis announced on the company’s web site, were not released. The sale comes after a March announcement by Otis Elevator officials that the company would stop taking new equipment orders and cease investing in Russia in the aftermath the invasion of Ukraine earlier this year.

“After carefully considering the global impacts and consequences of the ongoing crisis and humanitarian tragedy across Eastern Europe, including supply chain disruptions and mounting regulations, we determined that Otis’ ownership of our business in Russia is no longer sustainable,” Otis said in a prepared statement. “The sale of the business will provide a more certain future for local colleagues, customers and Otis shareholders.”

In its release, Otis Worldwide Corp., as the company is officially known, described Ice as “a Russian-based investment company with a focus on the real estate sector and overseeing large-scale residential construction including building restoration projects.”

The Russian company “expects to resume full production at the Otis St. Petersburg manufacturing site, under a new brand name,” Otis said.

The sale by Otis is complicated by the fact that the company’s product line is based on technologies that a buyer would not be expected to have. It was unclear from Wednesday’s announcement how, when and whether Otis would sell or transfer technology to Ice.

Since the war in Ukraine started earlier this year, Jeffrey Sonnenfeld, at the Yale School of Management, has closely followed how corporations have reacted to the conflict. Sonnenfeld, a professor and senior associate dean for leadership studies, has created a web site that follows corporations’ responses.

More than 1,000 companies have curtailed their operations in Russia, he said.

“Otis understands it is not feasible to continue doing business in Russia when Russia is needlessly killing thousands of innocent Ukrainian civilians,” Sonnenfeld said Wednesday. “Otis has superb, responsive and responsible leadership that tackled a vexing public safety challenge balancing off globally diplomacy and legal complications. Their response was brilliant, fair, and attentive to the needs of all stakeholders.”

Corporate America’s response to the war in Ukraine is “is parallel to what many of the great multinationals did when they pulled out of South Africa in the late 1980s,” he said.

It’s a moral decision but also financial, Sonnenfeld said.

“Auditors are increasingly concerned and looking to investigate such risky Russian business operations exposure,” Sonnenfeld said. “In short, it simply does not benefit companies to stay in Russia.”

An analysis Sonnenfeld and other Yale academics published in an academic paper at the end of May found “companies that divest from Russia are actually rewarded by shareholders and the value of stock gains far outweighs the value of Russian asset divestitures.”

Otis, in its release Wednesday, said, “We remain hopeful for a return to peace and stability in the region. We will continue to contribute to the ongoing relief and humanitarian efforts in Ukraine.”

Otis shares were up by 2.5 percent in mid-afternoon trading on the New York Stock Exchange Wednesday, with a sharp bump at the start of trading following the pre-market announcement.

luther.turmelle@hearstmediact.com

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