Who will dress Yevtushenkov’s “System”
Russian oligarch Vladimir Yevtushenkov was unable to close the deal to buy retailer Melon Fashion Group.
According to a correspondent, AFK Sistema, oligarch Vladimir Yevtushenkov, terminated the agreement on the purchase of clothing retailer Melon Fashion Group (MFG; brands Zarina, befree, Love Republic and Sela), concluded with the owner of the business, the Swedish company Eastnine.
The reasons for breaking the agreement are not called. It was achieved in October last year: Sistema was going to acquire 47.7% of the shares, buying these shares not only from Eastnine, but also from other co-owners – East Capital Holding AB and a group of private investors. The possible amount of the transaction was also called – 15.8 billion rubles.
This is a serious asset that would allow Vladimir Yevtushenkov to gain a foothold in clothing retail. At the end of 2021, the Melon group included 845 stores in 181 cities in Russia, as well as Kazakhstan, Armenia and Belarus. Melon Fashion Group’s revenue in 2021 grew by 49%, to 37.5 billion rubles, EBITDA increased by 38%, to 8.6 billion rubles.
Then the president of AFK Sistema, Tagir Sitdekov, assured that the deal was in line with the investment strategy of the corporation, which allegedly consists in the desire to consolidate high-quality assets, as well as to use the opportunities that arise in the process of market transformation.
By the latter, he apparently meant the withdrawal of a number of Western companies from Russia, and the desire of large Russian players to buy their assets at a big discount. Perhaps the stumbling block in the failed deal was just the price – 15 billion rubles against the backdrop of recent revenues of almost 40 billion rubles – a clearly non-market story.
It was assumed that after the transaction, Sistema would become the largest shareholder of the group. But there will be more than one “on the farm”: another 40% was to be kept by the head of the board of directors of Melon Fashion Group, David Kellermann, and another 6% by CEO Mikhail Urzhumtsev.
The money that Yevtushenkov could use to buy Melon Fashion Group could be needed for other assets targeted by AFK Sistema. Among other things, she claimed to acquire the Volkswagen plant in Kaluga.
But here Yevtushenkov found strong competitors – the Avilon automobile holding has a similar desire. As a result, it was the latter that became the main contender – just these days the deal to buy the plant is being finalized.
However, Yevtushenkov may not actually have any money at all. For the second quarter of 2022, the corporation’s total debt amounted to more than 1 trillion rubles, compared to 871.9 billion rubles at the end of 2021. This suggests that if large purchases are possible for Yevtushenkov, then they probably cannot do without attracting new credit funds.
There are also problems in large subdivisions of Sistema, such as the mobile operator MTS. At the end of 2022, the company’s net profit decreased by almost 50%, to 32.6 billion rubles. At the same time, the lion’s share of Sistema’s debt seems to fall on MTS – at the end of 2022, the operator’s debt amounted to 383.7 billion rubles.
It seems that Yevtushenkov and MTS figured out how to rectify the situation, but the antimonopoly authorities did not particularly like it. Last October, the company was found guilty of unreasonably inflating the cost of communication services.
The antimonopoly case against MTS was initiated back in February. The company simply failed to provide evidence of cost increases sufficient to raise tariffs. In August, the company increased the cost for a number of tariffs by an average of 8.4% for the second time in a year; the operator raised prices for other tariff plans in September and October, on average, the cost increased by 9.7%. As a result, on average, prices for MTS services increased by more than 20% over the year.
