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bne June 2021 Companies & Markets I 15
bne:Deal
Leading Russian supermarket chain Magnit buys rival Dixy
Ben Aris in Berlin
Russia’s regional supermarket specialist and one of the two biggest chains Magnit is in a deal to take over rival Dixy and add over 2,500 supermarkets to its distribution network, almost doubling its size in the process, Magnit said in a press release on May 18.
Magnit will acquire the shares in Dixy through its main operating subsidiary Tander and take over the 2,651 stores in Russia owned by the Dixy Holding Limited.
Dixy is in the top five largest chains in Russia and has been struggling for years to lift its game to compete directly with Magnit and the current market leader X5 Retail Group, but has never quite managed to pull it off.
“The total revenue of Dixy stores acquired (cRUB300bn) is about 18% of current Magnit’s. Thus post acquisition Magnit’s revenue to come to RUB2 trillion – pretty close to X5, and gives a good chance to catch up the leader’s place in the future,” Sova Capital said in a note.
“Dixy is in the top five largest chains in Russia and has been struggling for years to lift its game to compete directly with Magnit and the current market leader X5 Retail Group”
Magnit has also had its problems. Previously holding a commanding lead in the market, the company went off track after major arguments over direction broke out amongst the leading managers.
Magnit’s founder and CEO Sergei Galitsky decided to quit and sold a 29% to state-owned VTB Bank in February 2018, in a controversial deal. At the time Magnit was a portfolio
One of Russia's two leading supermarket chains Magnit has bought the third- largest store Dixi in a deal that will significantly boost Magnit's share of the two most lucrative markets in Russia: Moscow and St Petersburg.
investors’ darling trading with a p/e ratio multiple times higher than the bulk of Russian stocks. However, minority shareholders Prosperity Capital Management called the deal a “spit in the face of investors”, as the stake was just shy of the 30% threshold that would have triggered
a mandatory buyout of minorities. Galitsky retained 3% of the company’s stock and could have sold 32% to VTB, triggering the buy-out rule.
In 2018 X5 surged passed Magnit to become the biggest retailer in Russia on a revenue basis, but in 2019 a new management team took over and has started to put the business back on track, Jan Dunning, president and CEO of Magnit, told bne IntelliNews in an exclusive and in-depth interview in December.
Dixy bound
Dixy always had big ambitions and that the 2014 sanctions imposed on Russia following the annexation of Crimea were a boon to large organised retailers as they forced a process of consolidation on the sector and increased both the revenue and market share of the leading chains, the president of the company at the time, Ilya Yakubson, told bne IntelliNews in an interview in November 2015.
But the company consistently failed to meet its revenue targets and couldn't close the gap with its larger rivals. Dixy delisted from Moscow Exchange in 2018 and bought out the largest minority shareholder Prosperity Capital Management, which was a big investor in Dixy as well as Magnit, paying RUB8.9bn ($150mn) for its 20% stake.
In September 2019 it merged with liquor store chains Bristol and Red & White to become the third biggest retailer in Russia. But even that move was not enough to turn the company’s fortunes around.
Still, Dixy remains a major player amongst the ruthlessly com- petitive Russian supermarket scene. Its 2020 annual revenue was RUB281.4bn ($3.8bn) and in addition to the large net-
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