Russian retailer Lenta sets price range for share sale

February 15, 2014 - 12:05:14 am

A woman walks past a Lenta supermarket in Moscow. The hypermarket chain, part-owned by US private equity firm TPG, is gearing up for London market debut.

MOSCOW: Russian hypermarket chain Lenta, part-owned by US private equity firm TPG, has set a price range for its planned London market debut, which implies a market valuation of up to $5bn, the company said yesterday.

Lenta is the latest Russian consumer company to launch an stock market listing to cash in on the country’s rising middle class and follows the successful flotation of telecoms firm Megafon in 2012. 

But the sale comes as Russia’s economy is flagging — growth slumped from an average seven percent a year to just over one percent last year.    

The price range for Lenta’s offering is set at between $9.5 and $11.5 per one global depositary receipt (GDR), Lenta said in a statement  with five GDRs equalling one Lenta share. A roadshow for investors was to start yesterday and will run until February 27, after which the offer price is to be announced. 

The indicative price range implies a market capitalisation of between $4.09bn and $4.95bn, with the sale of some 19 million shares or 22.1 percent of existing share capital, Lenta said.         

Lenta has said TPG, which owns a 49.8 percent stake, will sell some of its shares, as will the European Bank for Reconstruction and Development, which holds 21.5 percent, and Russian bank VTB, which owns 11.7 percent.

Jan Dunning, Lenta chief executive, said in a statement the group was in a strong position to capture the significant growth potential in the fragmented and underpenetrated Russian food retail market.

Lenta competes with Russia’s biggest food retailer Magnit , which is focused on capitalising on increasing disposable income in Russia’s regions and has a market capitalisation of $23 billion, and smaller rival O’Key  with a market value of around $3 billion. 

Analysts at Bank of America Merrill Lynch said in a research note that the valuation implied a 2013 estimated price-earnings multiple of 18.4-22 times, a discount to Magnit but a premium to O’Key.

“The valuation reflects investors’ attitudes and is set somewhere in between Magnit and O’Key,” a banking source said.

Reuters

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