Billionaire Aleksey Mordashov’s Lenta, which entered the Urals two years ago after purchasing a small local chain called Semya, plans to expand its presence in this part of the country. Now the retailer is considering the possibility of acquiring the operator of more than 2,000 discount stores “Monetka” in Yekaterinburg, Perm, Tyumen and other cities, whose profitability is higher than that of a number of federal market players. If the deal closes, Lenta will have to integrate retail outlets into its overall business. However, according to experts, the previous results of this process after the company’s purchase of other networks, including Billa, were lower than expected.
The fact that Lenta, where the main shareholder is Alexei Mordashov’s Severgroup, began negotiations on the purchase of the Monetka network, founded in Yekaterinburg in 2001, was told by a Kommersant source in the regional retail market. This information was confirmed by two interlocutors of Kommersant from the federal retail segment. It is planned that the Monetka stores will continue to operate under this brand, and the Semya supermarkets in Perm, acquired by Lenta in 2021 for 2.45 billion rubles, will receive the same name, one of Kommersant’s interlocutors explains.
The Monetka chain manages 2.01 thousand discounters with a total area of almost 590 thousand square meters. m in Yekaterinburg, Perm, Tyumen and other cities of the Ural Federal District. The company also has four distribution centers for 24 thousand square meters. m. According to Infoline-Analytics, the company’s revenue in 2022 amounted to 177.7 billion rubles, which is 28% more year-on-year, in the first quarter of 2023 – 46.6 billion rubles, an increase of 11.4 %. The owner of Monetka is Roman Zabolotnov, who sold his other chain, Wright, to X5 Group in 2020.
Mikhail Burmistrov, CEO of Infoline-Analytics, estimates the value of Monetka’s business at a maximum of 100 billion rubles. But the deal with Lenta, if the parties close it, may go through in the price corridor of 60-70 billion rubles, he does not exclude. The expert calls Monetka one of the fastest growing regional FMCG networks.
So, in 2022, according to Infoline-Analytics, the company’s gross profit margin was 27.2% against 26% a year earlier. For comparison: Lenta itself, which operated almost 820 hypermarkets and small format stores across the country at the end of 2022, had this figure in 2022 of 22.5%. A number of federal retailers also had a lower gross profit margin than Monetka: Krasny & Bely 21.6%, Metro 21.9%, Svetofor 12%.
M&A deals are a logical continuation of Lenta’s strategy of doubling sales to RUB 1 trillion. (in 2022 it was 537 billion rubles), says Mr. Burmistrov
In turn, regional retailers, according to Ivan Zaichenko, the founder of the Zhiznmart network, find it more difficult to compete even in their own markets with federal operators. Referring to the data of the Federal Antimonopoly Service, the expert notes that the main market share in million-plus cities is now mainly occupied by Magnit and Pyaterochka stores (part of the X5 Group).
Mr. Zaichenko explains the interest of Lenta, which also develops hypermarkets, the falling popularity of this format and the flow of customers to convenience stores operated by Monetka. When closing the transaction, Lenta will have to integrate Monetka into its common business, but the results of this process, judging by the retailer’s previous acquisitions, including the Semya and Billa networks, did not give the expected result, Mikhail Burmistrov notes. Lenta purchased about 160 Billa stores in 2021.
However, the expert continues, recently the retailer has been strengthening top management, which should reformat the process of integrating acquired assets. So, Albert Porshnev, who had previously been the director of integration at Magnit, became the head of Lenta’s small formats.
There will be even more M&A transactions in FMCG retail, says Ilya Zharsky, managing partner of Veta expert group. Despite the crisis in the economy, revenue in this retail segment will at least remain stable, which is potentially attracting interest from investors, he adds. In turn, the expert notes, retailers will consolidate and increase the number of stores, and the easiest way is to buy existing chains.
