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bank debit card through either the Perekrestok or Pyaterochka mobile app. Users can also order a plastic card for home delivery, and will soon be able to receive cards at X5 Bank counters that will be installed at 30 Pyaterochka stores in Moscow over the next month. The digital X5 Card is already available to users of the Perekrestok mobile app in 10 cities. Within a month, the cards will also become available to Pyaterochka customers in 13 cities. The X5 Card is issued free of charge and has no maintenance fee. As the product line develops, X5 Bank plans to offer other payment services under its own brand.
● Magnit
VTB Group announced 18 November, that it had decided to sell its entire stake of ordinary shares in Magnit (c. 17.28%). Marathon Group is expected to acquire approximately 12.4% of the 17.28% via a private sale, whereas the remaining 4.9% was sold on the market via an accelerated bookbuild.
We remove MGNT (GDRs and ords) from our list of top picks due to the likely short-term downside pressures from the transaction. However, we remain positive about the stock on a 12M horizon due to the expected 9M21 dividend payment and the expansion in MGNT’s free float, and we do not expect any significant shifts in the retailer’s strategy. As for VTB, we see it earning more than RUB 25bn from the sale.
VTB’s sale of its stake in MGNT will be split into two parts. VTB placed a 4.9% stake (c. 5mn ords) on the open market via an accelerated bookbuild (“the Offering”). Marathon Group is expected to purchase approximately 12.4% of MGNT’s ords (c. 13.1mn) via a private sale at a similar price to the one in the Offering wrapped by a one-year lockup. The price for the Offering was set at RUB 5,700/share. This would imply a 9% discount to the price as of yesterday’s close (RUB 6,260/share). In this case, the transaction could earn VTB more than RUB 100bn.
Marathon Group is set to become MGNT’s largest shareholder, and MGNT’s free float is set to expand. Marathon Group is slated to accumulate 29.2% of MGNT’s share capital and hold voting rights derived from 25% of Magnit’s share capital until the remaining 4.2% voting stake is transferred under REPO to the buyer upon approval by Russia’s Federal Antimonopoly Service. Marathon Group does not plan to expand its stake to a controlling one, and we expect the shareholder to be committed to Magnit’s business strategy and to maintain its independent BoD structure. Furthermore, the retailer’s equity free float should increase 4.9% to c. 66.5%, which should be incrementally positive for the stock.
Solid 9M21 dividends should help to support the stock in the wake of the deal. MGNT’s Executive Board recommended an interim dividend of c. RUB 30bn (RUB 294.37/ord) to the EGM on 10 November, with the record date scheduled for 31 December. This implies a 20% YoY growth in the 9M21 dividend yield to c. 4.7% (as of yesterday’s closing
148 RUSSIA Country Report December 2021 www.intellinews.com