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EBRD invests $125 million in Russian food retailer Lenta
Bank takes equity stake to finance Lenta’s regional expansion
The European Bank for Reconstruction and Development (“EBRD”) is investing
$125 million to purchase a minority stake in Lenta, a leading St.
Petersburg-based food retailer, by subscribing to a new issue of the company’s
ordinary shares. The transaction is the EBRD’s biggest equity investment in
Russia outside the financial sector.
Retail is one of the fastest growing sectors of the Russian economy and the
EBRD investment will fund the group’s expansion beyond its St. Petersburg
home-base by bolstering Lenta’s capabilities to acquire new land plots, as
well as to construct, equip and launch its large-format food retail stores
across Russia’s regions where 90 percent of the population lives.
Alain Pilloux, EBRD Business Group Director for Russia, said the Bank was
pleased to continue supporting the regional expansion of Lenta, a company
which has made financial transparency and good corporate governance a high
priority. He described the transaction as a good example of long-term
partnership with a successful Russian company.
Sergei Yuschenko, CEO and General Director of Lenta, said EBRD’s equity
investment was a sign of confidence in the group’s strategy, as well as in the
growth prospects of the Russian retail market. This investment, by a
first-class institutional investor like EBRD, will help establish Lenta as the
market leader in its segment of large-format retail and help to finance its
national expansion efforts, Mr. Yuschenko added.
The group, which was founded in 1993, operates 10 stores in St. Petersburg and
has recently opened five stores in the Russian regions including two in
Novosibirsk, and one each in Astrakhan, Tyumen, and Volgograd. The company has
set itself the target of becoming a premier large-format Russian retailer
nationwide in the next few years and has an extensive pipeline of hypermarkets
in advanced stages of development. Its retail concept adapts to Russian
conditions the best business models taken from leading food retailers around
the world.
The equity investment is the third EBRD project involving Lenta, following two
loans made in 2004 and 2006. As part of the deal, the EBRD takes a seat on
the firm’s Board of Directors and its Audit Committee. An EBRD representative
thus joins current Lenta Board members Oleg Zherebtsov (Chairman), Sergei
Yuschenko (CEO and General Director) and non-executive Directors including
Loren Bough (shareholder), Greg Lykins (Main Street Trust, Inc.), Bill Woodard
(former executive of Wal-Mart) and Rob Voss (former executive of Wal-Mart).
Other details of this transaction were not disclosed. Lenta has increased its
retail sales from $653million in 2005 to $1.016 billion in 2006. In 2005,
Lenta operated 58,100 square meters of sales area. Currently, Lenta has
103,000 square meters of sales area open throughout Russia.
In the agribusiness sector alone, EBRD has to date committed more than €4.5
billion in 320 projects across Central and Eastern Europe and the Commonwealth
of Independent States. The EBRD is on May 20-21 holding its 16th Annual
General Meeting in Kazan, capital of the Russian Republic of Tatarstan.
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