Eastnine agrees to sell 36% stake in owner of Love Republic and Sela brands

The Swedish company Eastnine AB has entered into an agreement to sell a 36% stake in the Russian retailer Melon Fashion Group (MFG), which manages the fashion brands Zarina, befree, Love Republic and Sela, for 15.6 billion rubles. About it says in a company press release.

Eastnine, together with other European shareholders, signed an agreement with the Russian company Gem Invest LLC. It is expected that the transaction, which will take place in several stages, will be closed within two weeks. The company has already received the approval of the Federal Antimonopoly Service (FAS) and the government commission for foreign investment control.

The Swedish company sees risks in completing the deal due to “uncertainty”, including the risk of further sanctions and actions from the authorities. In addition, the transaction will be subject to the influence of the exchange rate until the exchange is made, since the share will be paid in rubles.

As of June 30, 2023, investments in MFG amounted to approximately 162 million euros, the company specified.

In May, Interfax, citing sources in the market informedthat Gem Capital, an investment company of Anatoly Paliy, received permission from the authorities to purchase a little more than 80% of the shares of Melon Fashion Group for almost 500 million rubles.

In October 2022, Eastnine signed with AFK Sistema a binding agreement to acquire from the Swedish companies Eastnine and East Capital Holding, as well as a group of private investors, a 47.7% stake in Melon Fashion Group. The deal amounted to 15.8 billion rubles. Then it was expected that it would be closed until the end of 2022. Then in AFK Sistema announced their readiness to buy up to 100% of the company’s authorized capital.

In March, the press service of Eastnine reported on termination of the transaction due to non-compliance with the terms of the agreement. It is noted that Eastnine expected to close the deal in the first quarter of 2023, but by this time not all obligations had been fulfilled. The press service of AFK Sistema also noted that the agreement was terminated by mutual decision.

In the spring, Eastnine also added that they will continue to look for a way out of their investments and are in dialogue with potential buyers.