MOSCOW (Reuters) - Russian food retailer Magnit (MGNT.MM) has launched a two-step equity fundraising deal aiming to raise around $700 million to fund its expansion.
Lavreno Limited, a company affiliated with Magnit’s main shareholder Sergey Galitskiy, sold 7.1 million shares in Magnit at 6,185 roubles (77.7 pounds) each, to raise 44 billion roubles through an accelerated bookbuild.
In the second phase, Magnit is to issue new shares which will be acquired by Lavreno, using the proceeds from the accelerated book-build.
The placing price represents a discount of around 11 percent to Tuesday’s close, which resulted in the stock falling sharply in early trade in Moscow. By 0906 GMT they were 8 percent lower at 6,389 roubles.
Analysts said the scheme allowed Galitskiy to quickly turn part of his Magnit stake into cash and then transfer the cash to Magnit.
Alexei Krivoshapko, director at investment fund Prosperity Capital Management, said Magnit was among a handful of companies capable of raising a large amount of money on the market in one day.
“It’s a symbol of quality. The scheme is (aimed) to get the money quickly. An additional share issue takes 90 days - and this way the money is already raised. Galitskiy may then lend it to the company,” Krivoshapko said.
Krivoshapko said he believed Magnit needed the money to finance an acquisition rather than fund organic growth.
Magnit said it planned to use around 60 percent of proceeds from the new share issue to invest in its store roll-out and refurbishment and the remaining 40 percent into expanding its food production.
The Krasnodar, southern Russia, based retailer plans to increase production of vegetables and branch out to other categories such as confectionary, cheese and pet food.
Retailers in Russia were hit by an economic downturn as the rouble devaluation in 2014 squeezed disposable incomes but are currently seeing signs of recovery as the economy returned to growth.
Reporting by Maria Kiselyova and Olga Sichkar, editing by Louise Heavens