Detsky Mir is the latest Russian retailer to prepare an initial public offering, joining Lenta Ltd. and Metro AG’s Cash & Carry unit in betting the nation’s retail market will woo investors.
Detsky Mir, the country’s largest retailer of children’s goods, has selected Credit Suisse Group AG (CSGN) and JPMorgan Chase & Co. (JPM) to help it sell shares later this year, two people familiar with the matter said, asking not to be identified before an announcement is made. The chain is owned by billionaire Vladimir Evtushenkov’s AFK Sistema.
While many investors have been attracted to the country’s oil and metals markets in the past, retailers are gaining favor after companies like OAO Magnit (MGNT) advanced 65 percent last year. Russia is forecast to be Europe’s biggest retail market by 2018 as chains increase their footprint across the world’s largest country, according to Euromonitor research.
“The Russian consumer-growth story still looks attractive to investors, at least in relative terms versus other European markets,” said Natalya Kolupaeva, an analyst at ZAO Raiffeisenbank in Moscow.
Lenta, controlled by U.S. leveraged buyout firm TPG Capital, plans to sell shares in London next month, with a possible secondary listing in Moscow, two other people familiar with the matter said. The company is seeking an equity valuation upwards of $5 billion, said the people, who also asked not to be identified before details are made public.
Lenta shareholders including TPG Capital and Russia’s VTB Capital are seeking to sell about $1 billion of stock, they said. The company doesn’t plan to issue new shares, one person said.
Metro, Germany’s biggest retailer, may start its IPO right after Lenta’s sale, according to two people with knowledge of the matter. Goldman Sachs Group Inc. (GS) and Sberbank of Russia have been named to manage the offering, which could raise over $1 billion, said the people, who also asked not to be identified as the details aren’t public. The company has thought about a partial IPO of the unit, Chief Executive Officer Olaf Koch said in December.
Representatives for the three companies and banks managing the sales declined to comment when contacted by Bloomberg News.
In the first half of 2013, Lenta was more profitable than Russia’s largest retailer Magnit. Magnit is traded at nearly 15 times its Ebitda versus average 3.9 times earnings multiple for companies in Russia’s benchmark Micex index. (INDEXCF) Magnit has a market value of about $28 billion in London trading.
Still, Magnit today reported slower sales growth in December as consumer-spending weakened over the holiday period. That sent the shares down the most in 18 months and may lead investors to revise their expectations for growth in the market, Kolupaeva said.