MOSCOW, April 11 (Reuters) - Russia’s largest lender Sberbank is in talks to buy mid-sized food retailer O’Key, six industry sources told Reuters.
The talks follow a decline in the shares of many Russian food retailers over the past year and expectations of upcoming consolidation due to tougher sector regulation and a fall in Russians’ disposable incomes.
If Sberbank agrees to buy O’Key, it may then sell it on to another investor, said one of the industry sources and a source, close to Sberbank’s top management. They did not disclose the name of the potential investor.
Sberbank declined to comment. O’Key did not reply to a Reuters request for comment.
Russian steel magnate Alexey Mordashov said in early April he would buy a major stake in O’Key’s larger rival - Lenta . Magnit, another major sector player part-owned by Russia’s second largest lender, VTB, has also expressed its interest in Lenta.
O’Key has a market value of around $500 million, down 26 percent since the end of 2017. None of the Reuters’ sources disclosed the price of the potential deal.
In August 2018, O’Key signed a non-revolving loan facility agreement with Sberbank for 12 billion roubles ($186 million) for the refinancing of debts.
One industry source said the talks had slowed down a little recently. The purchase, if agreed, will be for cash - not on a debt-for-equity basis - and O’Key’s discounter chain Da!, which stands for Yes! in Russian, may be left out of the deal, the source added.
O’Key launched Da! in 2015 while taking a cautious stance on expanding hypermarkets, its core business. In 2017, it sold its supermarkets to market leader X5.
The company held talks with major sector players in recent years about the sale of its hypermarkets but none of these negotiations ended up with a deal.
It currently has three major shareholders - businessmen Dmitry Korzhev, Dmitry Troitskiy and Boris Volchek, the company said in a recent presentation. Reuters was unable to locate them or their representatives. ($1 = 64.4375 roubles) (Reporting by Olga Popova, Tatiana Voronova, Polina Devitt, Darya Korsunskaya and Maria Kiselyova; writing by Polina Devitt; editing by Keith Weir)