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Safmar group of billionaire Mikhail Gutseriev confirms earlier reports and will acquire MediaMarktSaturn electronics retailer owned by the German Ceconomy, Vedomosti daily said on June 20 citing both companies.MediaMarkt will be included in the mega-merger of M.Video and Eldorado electronics retailers, which combined two of Russia’s top companies to create an unrivalled national retail champion as big as any company in the rest of Europe
Safmar will aslo sell a 15% stake in M.video to Ceconomy for $470mn, based on M.Video’s market capitalisation of $3.13bn, sources told Vedomosti. VTB Capital notes that this is the combined value of M.video+Eldorado+MediaMarkt post-merger, as the standalone M.video capitalisation is $1.2bn).
The deal value for Safmar is reportedly made up of economic control of Media Markt’s entire Russian business, valued at $170mn, plus $300mn in cash. The deal is to be closed by September 2018, after which M.video is to buy the MediaMarkt business from Safmar, possibly attracting debt financing.
The deal is still subject to Federal Antimonopoly Service (FAS) approval. Currently the total market share of M.video, Eldorado and MediaMarkt in Russia would be 29%, with MediaMarkt accounting for 3% of the total. VTB Capital reminds that market shares above 35% "typically catch FAS's attention."
VTB is "positive on the transaction, subject to the company's ability to successfully integrate the acquired business under the combined umbrella (presumably the MediaMarkt brand will be phased out) and remove potential inefficiencies and overlaps, given that the store size of MediaMarket is twice that typical for M.video and Eldorado."
The bank believes that the number of stores post-deal will be increased by means of splitting them between the Eldorado or M.Video brands, or adding m.mobile stores (M.Video’s mobile retailer).
Analysts believe the deal is a tacit admition by the German company that they cannot effectively compete with the Russian companies on their home market.
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