Magnit may buy back about 10% of securities from investors
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Large grocery retailer Magnit may spend more than 22.5 billion rubles. to buy back about 10% of its shares. The offer is addressed primarily to foreign investors, who will be able to sell securities at a discount to the market for 2.2 thousand rubles. per share. For such a mass of non-resident shareholders, this may be a unique chance to receive funds in foreign currency and withdraw them outside the Russian Federation, analysts say.
Magnit has launched a tender offer to buy back up to 10.19 million, or about 10% of its shares, in order to provide liquidity to shareholders who would like to exit their investments, reported (.pdf) company on Friday. The offer is aimed at foreign shareholders, but is formally addressed to shareholders who are residents of the Russian Federation. As part of the transaction, the structure of “Magnit” “Magnit Alliance” will acquire securities at a price of 2.2 thousand rubles. per share. According to the company, the price is set in accordance with the decision of the government commission for the control of foreign investment. On Friday, the shares of Magnit on the Moscow Exchange traded at 4.46-4.53 thousand rubles. for paper. The redemption of all shares as part of the offer may cost Magnit 22.57 billion rubles.
As of March 31, Magnit operates 27.9 thousand stores in Russia and Uzbekistan. In 2022, the company’s revenue grew by 26.7%, to 2.35 trillion rubles, net profit was 34.1 billion rubles. According to the results of the first quarter of 2023, Magnit’s revenue increased by 9%, to RUB 596.8 billion. year on year, net profit was 15.4 billion rubles.
At the end of 2021, Marathon Group was the main shareholder of Magnit with a 29.23% share, and 66.65% of the shares were in free float. Among the holders of the latter, 27.9% were investors from the US and Canada, 21.5% from the UK, 15.5% from the EU, and 16.1% from investors from countries other than Russia.
Magnit believes that the terms of the buyout are a worthy offer for a wide group of foreign investors in the current circumstances.
According to the company, the decision of the government commission will allow owners of blocked shares to receive funds from the sale of securities in Russian rubles, US dollars, euros or yuan to bank accounts in Russia or abroad.
The offer is also addressed to JPMorgan Chase Bank in relation to the shares of Magnit, which are accounted for in the custody account of the depository programs. In August 2022, Magnit announced the termination of the program of depositary receipts for converting those into ordinary shares. After the completion of the offer, Magnit expects to maintain its status as a public company with a listing on the Moscow Exchange.
Marat Ibragimov, senior analyst at Gazprombank, says Magnit’s tender looks reasonable given the highest free float among Russian companies, the largest GDR program and a high share of non-resident shareholders. “For foreign investors, this is essentially a unique chance to receive funds in foreign currency and withdraw them outside of Russia. We have seen isolated bilateral deals before, but this is the first known case for such a diversified mass of foreign shareholders,” he says.
According to the analyst, most foreign funds have written off Russian investments, so we can expect a fairly high share of the proposal execution. Magnit accepts applications from shareholders until July 19, and expects to complete the offer on August 10. Quotes of Magnit on the Moscow Exchange after the announcement of the offer grew by 3%.
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