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Lenta to Promote Highest Industry Growth in London IPO, CEO Says

Lenta Supermarket
A sign and a sunflower logo stand on display above a Lenta LLC supermarket in Prokopyevsk, Kemerevo region, Russia. Photographer: Andrey Rudakov/Bloomberg

Feb. 3 (Bloomberg) -– Lenta Ltd., the Russian hypermarket chain controlled by U.S. leveraged buyout firm TPG Capital, will peddle the industry’s fastest growth and highest profitability as it sells shares in a London initial public offering.

Sales and selling space at the St. Petersburg-based company are increasing faster than at any competitor, Chief Executive Officer Jan Dunning said today in a phone interview.

“We are convinced as a management team that we have quite a universal model that is well perceived by consumers,” Dunning said after Lenta announced that owners including TPG and Russia’s VTB Capital will offer stock in the IPO.

The retailer also reported an 11.4 percent margin on earnings before interest, taxes, depreciation and amortization last year, beating Russia’s retail industry leader OAO Magnit by profitability. Sales rose 31 percent as Lenta increased selling space by 35 percent. Same-store sales advanced 10 percent.

The owners, also including the European Bank for Reconstruction and Development, are seeking to raise about $1 billion from the IPO, two people familiar with the matter said last week. No new equity will be sold.

Dunning downplayed concern over slowing growth in Russia’s economy and retail market, saying that recent sales “are at a level that satisfies us a lot.”

Magnit, Russia’s largest retailer, has lost 20 percent of its value this year after sales growth slowed in December. Retail sales in Russia grew 3.8 percent in December compared with a year earlier, slowing for the first time in three months.

‘Slowing Down’

“We don’t think the Russian consumer is currently slowing down,” Lenta’s CEO said. “There is still a lot of opportunities in the country to grow our business, and that’s what we intend to do.”

Lenta isn’t active on the acquisition front, he said.

Last year’s 31 percent sales growth to 144 billion rubles ($4.1 billion) outstripped a 3.9 percent advance in total Russian retail sales, according to Federal Statistics Service data. Russia is Europe’s second-largest grocery retail market, according to researcher Euromonitor. Lenta primarily operates hypermarkets, the industry’s least developed segment.

The retailer has 77 warehouse-sized hypermarkets and 10 supermarkets in 45 Russian cities. It is seeking to double selling space in three years from 508,000 square meters (5,468,066 square feet) last year.

Lenta plans to list global depositary receipts in Moscow after its shares are admitted to London trading.

JPMorgan Chase & Co., Credit Suisse, VTB Capital, Deutsche Bank AG, UBS AG and TPG Capital BD are managing the sale.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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