Russian electronics retailer M.Video announced merging with its peer Eldorado in RUB45bn ($0.8bn) acquisition of 100% of Eldorado's shares.
This confirms previous exclusive report by bne IntelliNews of the the first big-with-big merger combining two of Russia’s top companies to create an unrivalled national retail champion as big as any company in the rest of Europe.
"As a result of the deal, M.Video’s scale could surge 1.5x, with a consolidated store base of 839 outlets, pro-forma revenues of RUB304bn and a consolidated market share of 25.9%," VTB Capital commented on March 23.
The deal would make M.Video one of the ten largest consumer electronics retailers globally, the bank estimated, while expecting a RUB18bn synergy impact, with some 60% coming from improvements to procurement.
To finance the deal, M.Video is to take a RUB40bn loan and increase its leverage to 1.5x net debt/Ebitda by the end of 2018, with deleveraging to be carried out by 2022.
Safmar Group of Mikhail Gutseriev and his family owns 57.7% in M.Video, with the Buduschee and Doverie pension funds controlling 9.4% and 5.8% each and 27.1% free floated.
VTB reminds that for 2017 "M.Video released robust financial results: the top line was up 8.2% y/y, to RUB 198bn, while the Ebitda margin improved 40bp y/y, to 6.0%."
The company outperformed the market (up 6% y/y in 2017) in the off-line channel, while the online platform surged an impressive 41% y/y, the bank notes, beating the 12% y/y growth for the total online market.
"We are a national champion brand,” Alexander Tynkovan and Said Gutseriev, the owner of Eldorado told bne IntelliNews in an exclusive interview.
“The recent crisis has been painful but we have been through multiple crises like the one in 1998. We are well trained by this environment and there has been a very high level of competition the whole time,” explained Tynkovan, exuding the energy he is famous for as a legendary retailer in the Russian market.
Tynkovan sold his remaining shares in M.Video to Gutseriev in April 2017 who paid the market rate of $7 per share, but says that he will stay on and manage the combined business for at least three years to ensure a smooth integration.