PPF Buys Remaining 50% Stake in Russian Retailer Eldorado

PPF Group NV, the Czech private equity group controlled by Petr Kellner, acquired the 50 percent of Russian retail chain Eldorado Group it doesn’t already own to tap growing demand for electronics.

PPF and Eldorado founder Igor Yakovlev agreed on the transaction on Aug. 19, according to Milan Tomanek, PPF’s head of communications. The parties agreed not to disclose the purchase price, which will be in financial statements later this year, he said.

“The consolidation of ownership in Eldorado has been one of our strategic priorities from the very beginning and it creates the platform for PPF to be a significant player in the Russian retail market,” Jiri Smejc, a PPF Group shareholder, said in a statement on its website. Ekaterina Khokhlova, a spokeswoman for Eldorado in Moscow, didn’t return calls or respond to e-mails seeking comment.

Alfa Bank predicts that Russia’s electronics market will exceed the pre-crisis level of $42.4 billion by 2015 with a stable ruble and continued recovery of consumer lending. The market shrunk to $25.6 billion in 2009, according to the bank. Russian retail sales have advanced for 19 straight months, expanding 5.6 percent in July from a year earlier, the Federal Statistics Service said Aug. 17. Sales rose 3 percent from June.

Russian Dispute

PPF has about 70 percent of its 12.4 billion euros ($18 billion) of assets in Russia, according to its 2010 annual report. The fund controls Home Credit & Finance, the eastern European consumer lender with a Russian unit, and owns a minority stake in Moscow-based Nomos Bank, which held a London initial public offering in April.

The group has been embroiled in a shareholder dispute over Russian billionaire Oleg Deripaska’s OAO Ingosstrakh after buying a stake in 2007. PPF and Italy’s Assicurazioni Generali SpA own 38.5 percent of the Moscow-based insurance company.

PPF acquired 50 percent plus one share of closely-held Eldorado in April 2009 in a debt-for-equity swap that valued the stake at $300 million. Eldorado borrowed from PPF to pay overdue debts to suppliers, the Russian electronics chain said in September 2008. Eldorado, which sells products from computers to flat-screen televisions and refrigerators, has stores in Ukraine and Kazakhstan as well as Russia.

‘Painful Restructuring’

Eldorado increased revenue 15 percent last year compared with 2009, according to PPF’s statement, which didn’t give a dollar amount. U.K. electronics seller DSG International Plc said in 2007 that it opted against buying Eldorado $1.9 billion after examining its accounts.

“Eldorado had to go through a painful restructuring because it had been too aggressive in its store openings and its balance sheet was overstretched,” Alfa Bank analyst Alexandra Melnikova said by phone in Moscow.

OAO M.video, a Moscow-listed electronics retailer, caught up with Eldorado after financial markets seized up in 2008 and may continue to gain market share, Alfa Bank said in May. M.video, which boosted revenue 19 percent last year to 86.6 billion rubles ($2.97 billion), may continue expanding sales at that rate through 2015 compared with 11 percent for the market, the bank said.

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