"Safmar" Gutseriev family can become a monopolist in the retail sales of electronics and household appliances. The group belonging to the group M.Video, which previously absorbed Eldorado, can buy out the Media Markt business, the Russian subsidiary of the German Media-Saturn-Holding GmbH. In turn, the German retailer intends to receive from 15% in M.Video. This will allow the retail company to maintain its presence on the Russian market, where it lost a total of 13 billion rubles in four years.
German Media-Saturn-Holding GmbH, owned by Ceconomy AG, discusses the possible sale of M.Video to its Russian subsidiary Media-Saturn-Group (this company manages the Media Markt network). Simultaneously, the German holding company can acquire a minority stake in M.Video. This was announced at the end of the week by Sebastian Kaufmann, vice president of Ceconomy AG. M.Video declined to comment. The Federal Antimonopoly Service of Russia said that they had not yet received a petition to approve the deal. This is due to the fact that the decision on the transaction has not yet been made and its terms have not been determined, Mr. Kaufmann said.
Founded in 1993, M.Video in December 2016 was acquired by the Safmar company of the Mikhail family and Sait-Salam Gutserievs. This group at that time already owned networks "Eldorado" and "Technosila" (from the last brand it was later decided to refuse). As of December 31, 2017, Safmar owns 424 stores of Eldorado and M.Video.
Ceconomy AG was established in the summer of 2017 as a result of the division of Metro businesses into two independent entities. The food line has retained the name Metro AG (Metro Cash & Carry supermarkets and Real hypermarkets), electronics and home appliances sales were united by the company Ceconomy AG (Media-Saturn network, in Russia - Media Markt). In Russia, the Media Markt network at the end of March 2018 consisted of 120 stores.
Reuters reports with reference to its sources that it may be about buying Media-Saturn-Holding GmbH a 15% stake in the combined company M.Video and Eldorado (officially this association took place at the end of March). The source of Kommersant, close to Safmar, confirms this figure. With the final decision, the size of the package that the German side will acquire may reach 25% minus 1 share, the interlocutor of "Kommersant" says. This, he said, is necessary for the Gutseriev family to maintain control over the business of the merged company.
According to Infoline-Analytics, in 2017, M.Video's share in the retail electronics and home appliances market was 16.7%, Eldorado - 8.9%, Media Markt 2.8%. In 2017, Media Markt's revenue decreased by more than 20% and amounted to just over 34 billion rubles. without VAT, the cumulative loss for 2013-2017 exceeded 13 billion rubles., the general director of Infoline-Analytics Mikhail Burmistrov estimated. Given that the project to open stores "Media Markt" in the Metro Cash & Carry was inefficient due to the low level of traffic, the sale of business remained the only opportunity for Ceconomy to stop losing money on the Russian market, the expert believes.
According to his estimates, the value of Media Markt does not exceed 4 billion rubles, while the cost of 15% of the combined company M.Video and Eldorado exceeds 15 billion rubles. ($ 245 million at the current rate of the Central Bank). Head of operations at the Russian stock market IK "Freedom Finance" George Vashchenko estimates 15% of "M.Video" and "Eldorado" in $ 284 million "M.Video" expects in five years to increase sales by 2.25 times, so the investment in the shares of this retailer is not meaningless, the expert believes. The purchase of the Media Markt business is necessary for M.Video to expand, as the network, Mr. Vaschenko reminds, set a goal to reach an annual turnover of 450 billion rubles by 2022.
Gutseriev can buy another network of shops of technology and electronics
"Safmar" is negotiating the purchase of Russian business Media Markt
German Media-Saturn-Holding reported that it is in talks with M.video about the sale of Russian business to Media Markt. At the same time Media-Saturn-Holding is considering the possibility to acquire a minority stake in M.video.
Decisions on transactions are not accepted and it is unclear whether they will take place and on what terms, the report says. The fact that the owners of Russian Media Markt stores are discussing the sale of business to the conglomerate M.video and Eldorado, Reuters reported.
The representative of M.video declined to comment. The representative of "Safmar", owning "M. Video" and "Eldorado", said that now he does not comment on the purchase of Media Markt business in Russia. "M. Video" and "Eldorado" belong to the group "Safmar" by Mikhail Gutseriev.
German Media Markt opened the first store in Russia in late 2006, but could not gain a foothold among the leaders in the market of household appliances and electronics. First prevented the crisis in 2008 - then because of unsatisfactory financial results, the retailer was replaced by top management. Then we had to abandon the brand Saturn (the emergence of such stores became known in 2007) and focus on the main - Media Markt. And the devaluation of the ruble at the end of 2014 and the decline in the home appliances and electronics market forced the company to reduce its retail network. For the 2016/17 fiscal year, the Media Markt network in Russia fell by five points, at the beginning of October 2017 it had 57 stores.
Media Markt tried to rebuild work in Russia and last year began to open stores in the store Metro Cash & Carry, but failed. "Media Markt points did not have a separate entrance, people do not go there without a Metro client card, traffic is extremely low," said Mikhail Burmistrov, general director of Infoline Analytics.
The turnover of the German retailer (SPARK-Interfax data on the main legal entity, Media-Markt-Saturn LLC) is steadily declining: from 53.6 billion rubles. in 2014 to 41.4 billion in 2016. In 2017 the turnover was, estimated Burmistrov, about 40 billion rubles. with VAT, net debt - more than 7 billion. The accumulated loss of Russian Media Markt over the past five years, he believes, is over 13 billion rubles. "Media Markt's lack of interest in Russian business is understandable," Burmistrov said.
Russian business Media Markt hardly costs more than 4 billion rubles. taking into account the debt and the ability to use the brand Media Markt for a while, Burmistrov argues, and since the German company wants to get a share in M.video, the deal can become cash-strapped. "If the asset is consolidated into a large company, with other terms of purchase, optimizes expenses for the head office, etc., it will be close to Eldorado by efficiency," he believes.
Safmara's interest in technology and electronics trading first appeared in late 2016 - the group bought 100% of Eldorado from the Czech PPF and Emma Capital. A week later the group announced the purchase of M.Video from its founders Alexander and Mikhail Tynkovanov and Pavel Breev. Now, "M. Video" and "Eldorado" are preparing to unite. The combined company, according to the presentation of both networks, now has 25.9% of the household appliances and electronics market in Russia. Media Markt has only 3.3%.
This is a small fraction and it is rapidly declining, Burmistrov points out: the deal "Eldorado" with "M. Video" has already been approved by the Federal Antimonopoly Service and it is unlikely that the purchase of such a small player will cause any problems with the agreement.
Consolidation of retail appliances and electronics can even have a positive impact on the relationship of other players with vendors, believes the general director of the electronic discounter Citylink Mikhail Slavinsky: suppliers need an alternative in retail. The rest of retailers may also have more opportunities for growth, including in the format of hypermarkets, he concludes.