TPG Group, the largest shareholder of the Lenta hypermarket chain, is negotiating the sale of its entire stake in the retailer of Alexey Mordashov’s Severgroup. This was reported to Vedomosti by an investment banker, two portfolio investors and a source close to one of the investment banks who are aware of the negotiations from different sides of the transaction. Later "Lenta" confirmed that such negotiations are underway.
TPG owns 34.13% in Lenta. In free circulation - 57.22%. If the parties agree, Severgroup will make an offer to all shareholders and holders of Lenta’s receipts, the retailer said.
At the close of trading in London on March 26, one “Lenta” receipt was worth $ 3.33. Thus, the TPG package in Lenta could cost about $ 547 million with a retailer capitalizing at $ 1.6 billion.
Representatives of the Severgroup and TPG declined to comment.
Forbes in 2019 estimated the state of Mordashov at $ 20.5 billion. The basis of his condition is the third largest steelmaking company in Russia, Severstal, where the entrepreneur has 77.03%. At the close of trading on March 26, such a package on the London Stock Exchange was worth about $ 10.06 billion. Severstal is one of the most profitable companies in the industry. Over the past five years, EBITDA margin has remained at 30%, the debt load has been consistently below 1 EBITDA, and free cash flow exceeds $ 1 billion.
Severstal regularly pays dividends: in total, from 2009 to 2018, it paid shareholders $ 8.17 billion, including Mordashov - $ 6.3 billion. Although the businessman’s main source of income is connected with Severstal, his interests in the steel industry are not limited. So, he owns gold mining Nord Gold, a manufacturer of Power Machines turbines and birch plywood Sveza, shares in National Media Group, CTC Media, Tele2 Russia, Russia Bank, etc.
Mordashov also has experience in the field of trade and services: Severgrupp owns the largest online seller of food products in Russia, Utkonos, founded in 2000. Among the entrepreneur’s other assets are 24.9% of the TUI travel company, one of the largest in the world.
In the past year and a half, Mordashov has been actively interested in large offline retail, in particular “Magnit”, two Mordashov friends say. But the main shareholder of the network, Sergey Galitsky, in early 2018 sold almost his entire package to VTB.
Lenta conducted an IPO in February 2014, before the annexation of the Crimea and the subsequent sanctions against Russia. The company was valued at $ 4.3 billion. Peak network quotes reached the summer of 2014. And then they steadily declined.
Recently, Lenta experienced difficulties, the company could not manage to achieve a steady increase in the flow of customers in its hypermarkets. In 2018, Lenta, as a public company, warned investors for the first time in its history that it would not fulfill network growth plans.
“Lenta” has recently become less attractive, analysts at VTB Capital say: network growth has slowed down, development strategy is unclear, profitability is declining. Market capitalization does not take into account all the advantages of a high-quality and promising asset, CEO of Infoline-analytics Mikhail Burmistrov argues: “It may happen that Mordashov will spend less to buy a stake in Lenta than he spent on Platypus during its existence. nearly $ 1 billion. "
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An acquaintance of Mordashov suggests that one of the possible options is a synergy of a large federal retailer and Platypus, which only works online. "Lenta" has always been cautious about the development of sales on the Internet, reminds Burmistrov: until now it was limited to working with partners - delivery services from its stores.
The synergy of Lenta and the online retailer is possible, according to Evgeny Belashchenko, a partner at Bain & Company: for example, one could use hypermarkets to collect online orders or open a dark store there — zones that work only for online orders. In addition, the presence of Lenta in million-plus cities opens up opportunities for the development of online sales, the expert reminds. This is more efficient than bringing a new online brand to the market, because with online purchases of products, buyers are more often loyal to stores where they already buy offline.
Mordashov is a strategist and visionary who actively invests in IT and online projects, reminds Burmistrov. Among its venture capital investments in networks are the educational platform Netologiya, several recruiting services and Remontnik.ru. Lenta can only benefit from its strategic approach, the expert believes: if the deal goes through, the retailer’s development can accelerate significantly not through any synergy with the Platypus, but through new expertise and prioritization of investments in technology. “Lenta” may return to the struggle for technological leadership with X5 Retail Group, which in the past few years has been far ahead of everyone in the industry, ”the expert predicts.