Rumored Lenta Bidders Play Cards Close to Chest
By Yevgeny Rozhkov
Special to The St. Petersburg Times
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Alexander Belenky / The St. Petersburg Times
Lenta is attractive to buyers as a well-established and popular chain of 31 hypermarkets, including 14 in St. Petersburg.
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The owners of the St. Petersburg-based hypermarket chain Lenta will sell an 89-percent stake that includes all of the shareholders’ shares except for those held by the European Bank for Reconstruction and Development (EBRD). The global retail giants Wal-Mart and Carrefour and the American investment fund TPG Capital are among the companies bidding for control of the Russian retailer chain stores. The tender was initiated in spring by Lenta’s founder, Oleg Zherebtsov, and his U.S.-born partner August Meyer, who own a combined 70 percent of the company and have been locked in a shareholders’ dispute for almost half a year. In January, Zherebtsov sued Meyer and the case was heard at the St. Petersburg Arbitration Court. In April, the warring owners eventually reached a compromise and cooperated in seeking new sources of funding for the firm, as a result of which the company was sold. The deadline for offers from prospective buyers was initially scheduled for July 18, but according to a source in the company, bids are expected until July 25 and the sale will be held early August. Zherebtsov’s financial interests in the deal are represented by ABN Amro, while Meyer is being advised by Renaissance Capital analysts. Both parties declined to comment. The EBRD, which owns an 11-percent stake purchased in 2007 for $125 million, is not taking part in the tender. The deal is unique for the Russian retail market, since the hypermarket chain will most likely be sold to a western player, in spite of the fact that Russia’s largest retail chain, X5, had previously expressed interest in merging with Lenta. “If Lenta’s owners offered us the opportunity to do such a deal, we would consider it,” X5’s chairman and chief executive Lev Khasis said in an interview. But in May, Zherebtsov denied reports on the forthcoming sale of the company. As an established business, Lenta is being targeted by several companies and funds, including global giants Wal-Mart and Carrefour, Germany’s Metro Group, France’s Auchan, Croatia’s Agrokor Group and Finland’s Kesko, along with BC-Partners and TPG, the Russian daily Vedomosti reported. The director of Governmental and International Affairs at Metro Cash & Carry in Russia, Oksana Tokoreva, denied that Metro Group would take part in the tender. Wal-Mart, the world’s largest retailer, which has a representative office in Russia but no retail outlets in the country, declined to comment on the rumors. Auchan’s Russian Branch and Kesko officials also declined to comment, while representatives of Agrokor and BC Partners could not be reached for comment. Thomas Choutin, Assets and Development Director for Russia of Carrefour, which is number one in Europe and number two worldwide, confirmed to Vedomosti that the company is exploring the opportunity of purchasing a retail store network in Russia, but avoided speaking about it in detail. A minority shareholder of Lenta, who spoke on condition of confidentiality, expects that financial funds will buy the shares. The estimated cost will reach around $1.8-$2.2 billion, according to Yulia Gordeyeva, an analyst at IMG group insurance company. “The battle to purchase Lenta will be tense, as this is a well-established hypermarket chain with clear goals and a catchy brand name,” said Gordeyeva. “Since it is the fastest-growing segment in the Russian market, it might be attractive for international investment companies.” Market analysts predict that as soon as most of the stakes have been acquired by new owners, the brand name will be changed along with the company’s development strategy, which might involve a further resale of the company. Lenta chain store currently includes 31 hypermarkets, with 14 in St. Petersburg, and the remainder in other major Russian cities. The company’s revenues after VAT were $1.5 billion in 2007.
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