One of Russia's largest retail chains is to float on the London stockmarket. Similar to the Aldi and Lidl business models shaking up the UK supermarket industry, Russia's Lenta has thrived with its low-cost model, both in terms of selling prices and its own overheads.
Lenta will join both the London and Moscow stockmarkets, placing stock held by existing shareholders rather than issuing new shares. The listing is a way for three big investors to reduce their holding, being US leveraged buyout firm TPG which owns 49.8% of the company, the European Bank for Reconstruction and Developments (21.5%) and VTB Capital Private Equity which has 11.7%.
The London listing will be in the form of global depositary receipts, often referred to as 'GDRs'. These are essentially packets of shares predominantly aimed at the institutional investor market, such as pension funds and banks.
The general public can also trade the shares through spread bets. GDRs cannot be held in ordinary share dealing accounts or Isas; instead you need to go through a spread betting provider. Most will only let you take a 'long' position, ie. Bet that the shares will go up in value, so those negative on the stock are unlikely to 'short sell' Lenta.
It is Russia's second-largest hypermarket chain with 77 sites in 45 cities. In Moscow it has 10 supermarkets and now plans to double its selling space over the next three years. Lenta will soon be joined on the London market by German retailer Metro which plans to list part of its Russian Cash & Carry business. This is Metro's third biggest market behind Germany and France.
This interesting article from Bloomberg highlights the problems facing Russian domestic listings due to currency weakness and the need for Lenta to not overprice its shares if it wants the IPO to get away smoothly. No timing has been given for Lenta's listing.
This table illustrates the past financial performance for the group. The company has enjoyed positive like-for-like sales growth and significant geographic expansion funded mostly by its own cash generation.
Its expansion programme focuses on three hypermarket formats; standard, compact and super compact which range in size from 3,000 to 7,000 square metres in addition to supermarket stores.