TPG’s Russian Retailer Lenta Said Set to Raise $1 Billion

Lenta Ltd., the Russian hypermarket chain controlled by U.S. fund TPG Capital, is set to raise at least $1 billion for shareholders in an initial public offering in London after the low end of its price range was increased, according to two people with knowledge of the matter.

The price range was narrowed to $10 to $11 per depositary receipt yesterday, said the people, asking not to be identified as the information isn’t public. The book is covered at $10.50, they said. At that price, Lenta shareholders, including the European Bank for Reconstruction and Development and VTB Capital, will raise $1 billion, excluding an over-allotment option. It implies a market value of about $4.5 billion.

Lenta is one of at least three Russian retailers seeking to take advantage of a recovery in share sales, while London IPOs raised double the cash last year as in 2012. The Detsky Mir children’s goods chain is looking to list in London, and German retailer Metro AG’s Russian Cash & Carry unit plans to sell shares in the first half.

“Lenta picked a good moment to do an IPO, there’s lots of money in the markets,” Oleg Popov, who manages $1 billion of securities for Allianz Investments in Moscow, said by phone. “There’s a lot of appetite for retailers. The banks managed to convince investors that hypermarkets are a good bet in Russia.”

AO World Plc, a U.K. online appliances seller, traded as much as 45 percent above its IPO price on debut today. The retailer was valued at 72 times projected 2015 earnings before interest, taxes, depreciation and amortization, or Ebitda, at the IPO price, said a person with knowledge of the matter.

‘Not Greedy’

OAO Magnit, Russia’s biggest food retailer, climbed 91 percent in Moscow last year, while OAO M.video, the nation’s biggest electronics retailer, gained 24 percent. The Micex Index rose 2 percent. X5 Retail Group NV, which is seeking to close a gap with its competitors, dropped 6.1 percent in London in 2013.

Lenta’s IPO books close tomorrow, while the stock is scheduled to start trading on Feb. 28, the terms sheet shows. The range was narrowed from $9.50 to $11.50 earlier.

JPMorgan Chase & Co., Credit Suisse Group AG, VTB Capital, Deutsche Bank AG, UBS AG and TPG Capital BD are managing the sale. The joint bookrunners were to be granted a 15 percent over-allotment option, according to Lenta.

“Lenta shareholders weren’t greedy and set a reasonable price range from the very beginning,” said Yulia Bushueva, who helps manage $500 million at Arbat Investment Services in Moscow. “This tactic allowed it to draw interest to the IPO.”

TPG is also looking to sell other retailers under its ownership. J. Crew Group Inc., in which Leonard Green & Partners LP also owns a stake, is interviewing banks as it weighs an IPO in the U.S. later this year, people familiar with the matter said. A sale could value the retailer at $5 billion, one of the people said.

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