Page 109 - RusRPTDec18

company is well run and leads the highly profitable children’s goods retail segment. Safmar has recently made headlines due to the mega-merger of its electronics retail assets, and the consolidation of oil assets. Previous reports also suggested that Russian billionaire and senator Suleiman Kerimov is also toying with the idea of acquiring a stake in Detsky Mir. Sistema holds 52.1% in Detsky Mir, another 14.03% held by the Russia-China Investment Fund, the rest free floated. Control in the company was previously estimated to be worth RUB45bn. On November 28 the market value of the controlling stake was RUB35.5bn ($530mn). Detsky Mir controls 20% of Russian children’s goods market, has an annual turnover of RUB530bn ($7.8bn). The company recently posted strong third-quarter results, develops online sales, increased its store opening guidance, and could possibly pay out all profit in dividends.
Russia's second-largest retailer Magnit finalised the acquisition of 100% of pharmaceutical wholesaler and distributor SIA Group from its shareholder Marathon Group of Alexander Vinokurov (an investment group that controls 11.8%), the company said on November 2. Magnit is in intense rivalry with X5 Retail Group and under the management of recently appointed CEO Olga Naumova is staging a comeback as the country's largest retailer. But analysts are sceptical of the SIA Group acquisition and whether expansion in the non-core pharmaceutical business will be helpful. "Margin outlook is uncertain, but we still see more downside risks from current levels, while Magnit’s plan to develop the pharmacy business with the acquisition of SIA from Marathon is an unnecessary distraction," Renaissance Capital analysts wrote in October as Magnit announced its updated growth strategy. The cashless deal was paid for with 1.4% or RUB5.7bn worth of Magnit's shares that Marathon is allowed to sell after a three year lock up. To afford the deal Magnit previously expanded its share buyout programme by RUB5.7bn to RUB22.2bn. SIA Group posted revenues of RUB54.5bn in 2017 and had RUB10.7bn debt with VTB Bank (also shareholder in Magnit with 17.28%) being its main creditor.
One of Russia's largest retailers Magnit will expand cooperation with the Russian Post (Pochta Rossii) and open small convenience stores in 2,000 post offices in the Southern Federal district, the companies said on November 29. The pilot stores ran by Magnit and the Post boosted the sales of food and convenience products five-fold. Cooperation with the Russian Post could also become a platform for Magnit in possible expanding into online retail, while its current strategy has been questioned by the analysts. Magnit's main rival and the market leader X5 Group has recently been actively rolling out online retail and digital initiatives. One of the largest shareholders in Magnit is VTB Bank, which bought 29% stake form the chain's founder Sergei Galitsky in February for RUB138bn ($2.25bn). VTB then brought the stake down to 17.3% after selling 12.05mn shares, or 11.82%, to the Marathon Group of Alexander Vinokurov for a reported $1bn. VTB is affiliated with Russian Post, which recently said it will boost e-commerce infrastructure in 34 Russian cities and open express delivery channels from China, speeding up deliveries from two-three weeks to one week, and in 18-24 months to up to three days. VTB also eyes an alliance with Chinese Alibaba. This month reports suggested that X5 Group is in direct talks with China Post on developing alternative delivery routes for goods from China. Reportedly the initiative seeks to leverage X5’s logistics platforms and in-store parcel lockers and pick-up points.
X5 Retail Group announced that the Pyaterochka chain (75% of X5 Retail Group’s revenues in 2017) was expected to increase its store count in Siberia 45% in 2019, with a 38% increase in its store count in the Kemerovo
109 RUSSIA Country Report December 2018 www.intellinews.com