Russia's Mercury Retail sets IPO price range, implies up to $13bln market cap

Russian IPO activity has picked up pace

  
A man walks past an information screen inside the office of the Moscow Exchange in Moscow, Russia February 28, 2020.

A man walks past an information screen inside the office of the Moscow Exchange in Moscow, Russia February 28, 2020.

Reuters/Maxim Shemetov

MOSCOW- Russia's Mercury Retail Group on Wednesday said it aims to raise $1.2 billion-1.3 billion in a Moscow initial public offering this month, giving it a market capitalisation of $12 billion-$13 billion, the largest for a Russian listing in the post-sanctions era.

Russian IPO activity has picked up pace as the economy improves after the COVID-19 pandemic last year and as concerns over more Western sanctions fade. IT firm Softline raised $400 million last week. 

Mercury Retail said the indicative IPO price range had been set at $6-$6.50 per global depositary receipt (GDR) for the offering of up to 200 million GDRs on the Moscow Exchange.

The group, which runs two nationwide chains of alcohol and convenience stores, said book-building would begin on Wednesday and end on or around Nov. 9, with trading on the Moscow Exchange under the ticker symbol "MRHL" expected on or around Nov. 10.

A mix of low incomes and rising inflation is stifling purchasing power in Russia and driving growth of discounters and convenience stores, a trend that has benefited Mercury Retail's more than 14,000 stores across the country. 

The group, which intends to pay 50% of net income in quarterly dividends, on Wednesday said like-for-like sales rose approximately 14% year-on-year in the third quarter, having grown 15.9% on average for the eight previous quarters.

Most of the business is owned by three men. Sergei Studennikov, founder of the group's Krasnoe & Beloe chain, holds a 45% stake, while Igor Kesaev and Sergei Katsiev have holdings of 37% and 8% respectively.

Co-CEO Katsiev on Wednesday said annual revenue growth was seen at 25-30% in the medium term and that there was potential to expand store numbers to 50,000, opening around 3,000 stores each year from 2023 onwards.

Mercury Retail Chairman Kesaev said the company was presenting its business model to international and Russian investors.

The offer includes stabilisation arrangements - whereby up to 13% of GDRs sold in the offering may be repurchased - to support the price of the GDRs once trading on the open market, the company said in a memorandum.

BofA Securities, JPMorgan, SberCIB and VTB Capital are acting as joint global coordinators and joint bookrunners.

Gazprombank and Renaissance Capital are joint bookrunners.

(Reporting by Alexander Marrow and Olga Popova; Editing by Himani Sarkar, Lincoln Feast and Jan Harvey) ((alexander.marrow@thomsonreuters.com;))


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