VTB closed a deal to buy 29.1% of Magnit shares

Magnit
Magnit

OOO “VTB Infrastructure investments” received 29.1 percent of the shares of PJSC “Magnit” (29 million 656,2 thousand shares) stated in the message of the retailer. The deal was closed on March 14. The share of Sergei Galitsky in the “Magnit” decreased to 3% from 32.1% (including indirect ownership). Now the founder and former CEO of the network owns 3 million 103,932 thousand shares.

The deal was announced on February 16, and on February 20 it was approved by the Federal Antimonopoly Service. The transaction amount is 138 billion rubles (4,661 thousand rubles per share – discounted to the market price at the time of the announcement of the transaction).

Galitsky left the post of General Director of Magnit (CFO of the retailer Khachatur Pombukhchan was appointed to this post since February 17) and plans to leave the Board of Directors.

The new Board of Directors of Magnit can include Tim Demchenko (head of the Department of direct investments and special projects “VTB Capital”) and Alexey Makhnev (head of the Department of Consumer Sector of “VTB Capital”, for many years served as an independent Director of Magnit). The size of the Board is planned to be maintained (now it has seven members). It is assumed that the management of the retailer in the Boaard will be represented by Pombukhchan and Deputy General Director for sales and HR Ilya Sattarov. There will also be three independent Directors on the Board. Meeting of shareholders, whose agenda contains the issue on election of the Board of Directors, will be held on April 19.

The transaction with VTB does not imply an option for the seler to repurchase the package. “Even if such conditions were present, I would be against it. Burn bridges. I did all I could do for the company. People with new motivation who want to do more should come,” said the founder of Magnit.

According to Galitsky, the reason for the decision to sell most of the package in “Magnit” were different approaches to the development of the company, which he and investors had. “In fact, it was the impetus that investors do not quite see the situation as the shareholders of the company see, ” he said at the signing ceremony.

Magnit still retains announced in January development plans for the current year, although a number of analysts predicted that the retailer will grow more aggressively. The company should continue to expand, but to do so carefully and focus on the results of stores, said at a conference call in February first Deputy President – Chairman of the Board of VTB Yuri Solovyov. There are no major M&A deals in the plans, the priority is improvement of the internal structure, motivation program for top management and organic changes, he noted.

VTB has no plans to increase its stake in Magnit, Solovyov said at the signing ceremony. Answering the question about the time horizon of investments, he recalled that on average for VTB Group it is “more than two years and less than five”, “two or three years of ownership is minimal”. “Here it is accurately measured over the years.”

FAS sees no threat to competition in case of possible resale of retailer’s shares by VTB Bank in the future, but will intervene if necessary, head of the service Igor Artemyev said. “I am confident that VTB bought shares for resale. They have, probably, already now projected buyers. As part of the control over economic concentration, we will ensure that we do not have a monopoly monster in this sphere,” he said.

Magnit is the largest retailer in Russia by the number of stores (at the end of December there were 16,35 thousand, including 12,125 thousand “near home” {convinience} stores). In terms of revenue, at the end of 2016, Magnit lost the lead to its closest competitor X5 Retail Group, and during 2017 the gap between the companies increased.

In 2018, Magnit plans to open 1.5 thousand convinience stores, 700 cosmetics stores, 20 hypermarkets and supermarkets and update 1.2 thousand stores. Magnit’s revenue growth forecast for 2018 is 7-9%. In 2017, the revenue of Magnit grew by 6.4% (to 1.14 trillion rubles) and it is much lower dynamics than that of X5 (25.5 per cent).

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