Russian retailer Lenta sets price range for share sale

Fri Feb 14, 2014 6:51am EST
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By Olga Popova

MOSCOW (Reuters) - Russian hypermarkets chain Lenta, part-owned by U.S. private equity firm TPG TPG.UL, has set a price range for its planned London share market offer, valuing the company at up to $5 billion.

Lenta is among a number of retail companies hoping to tap into a demand from foreign investors for stakes in consumer-oriented businesses in Russia and follows the successful flotation of telecoms firm Megafon MFON.MM MFONq.L back in 2012 and Russian consumer credit firm TCS TCSq.L last year.

Other consumer-focused IPOs are expected such as children's goods retailer Detsky Mir, owned by oil-to-telecoms conglomerate Sistema (SSAq.L: Quote), corporate and individual loans bank Credit Bank of Moscow and German retailer Metro AG's (MEOG.DE: Quote) Russian cash-and-carry business. IDnL6N0HZ2SS IDnL5N0L21G1

"The Russian consumer space is consistently one of the fastest growing across the emerging market world," said Chris Weafer, a senior partner with consultancy Macro-Advisory.

"The difficulty (Lenta) will come up with is whether or not they have to adjust the valuation to reflect ... emerging market phobia and some concerns whether the slowdown in the Russian economy may have a greater impact on consumer activity."

Emerging markets have seen outflows and currency volatility in recent months as investors worry about lower growth and the ending of the U.S. Federal Reserve's monetary stimulus program.

Russia's economy is also flagging - growth fell from an average 7 percent a year to just over one percent last year, causing a slowdown in consumer sectors such as auto sales and some of Lenta's rivals have seen growth rates start to slow.

Last month Russia's biggest food retailer Magnit (MGNTq.L: Quote) MGNT.MM reduced its sales growth forecast for the year while third-biggest food retailer Dixy (DIXY.MM: Quote) has reported annualised sales growth in December and January slowed to 17 percent from 24-25 percent in November and October.   Continued...

People walk out of a Lenta supermarket in Moscow, February 3, 2014. REUTERS/Maxim Shemetov