News that Russian steel tycoon Alexey Mordashov agreed to buy a 42 percent stake in Russian food retailer Lenta at a premium to the market price, supported the company’s share price on Tuesday, Reuters reported.
Lenta’s GDRs were up 2.8 percent at $3.475 per receipt in London on Tuesday.
Lenta is the largest hypermarket operator in Russia and is the country’s third largest grocery retailer with a market share of 3.2 percent. The company may benefit from cooperation with Utkonos, the largest online grocery retailer in Russia, which Mordashov already owns.
Using its own funds, Mordashov’s holding Severgroup will buy the stake for $729 million from U.S. private equity fund TPG and the European Bank for Reconstruction and Development (EBRD), Severgroup said in a statement.
“We see tremendous value in businesses that improve people’s quality of life and we believe there is great potential in retail as an industry which is now going through an important transformation,” Mordashov said in the statement.
Mordashov is Russia’s second richest businessman with a wealth estimated by Forbes magazine at $18.7 billion. Russian steel producer Severstal is the core of his empire.
Lenta’s 2018 adjusted core earnings, or EBITDA, rose 2 percent to 36.2 billion roubles ($553 million). The company, whose net debt was 93.3 billion roubles at the end of 2018, plans to open 8 new hypermarkets and 7 new supermarkets in 2019.
“Taking into consideration the price premiums as well as possible synergies for Lenta from using Severgroup’s expertise in IT solutions to improve its market position, we deem the news positive,” analysts at Aton said in a note.
The deal is expected to be completed by the end of May, subject to approval by Russia’s anti-monopoly regulator.