Moody's Investors Service believes that the planned IPO of Russian retailer Lenta is neutral for its rating of B1. The IPO will not result in new equity injection and is not expected to bring any materials changes to shareholder structure. The agency believes that none of the shareholders intend to fully exit the company and no strategic investors are not expected to enter at this stage.
Moody's believes that the IPO is a first step of current shareholders to a full exit expected in three to five years. At the same time thanks to the IPO might further facilitate Lenta's governance transparency and help with access to the equity markets.
VTB Capital, one of the organisers of an IPO of Russian retailer Lenta values the company at USD 5.291bn-USD 6.185bn ahead of its IPO, Prime reported earlier after seeing a valuation report.
VTB Capital reportedly compares Lenta to similar retailer in Russia (Magnit and Okay Group), Turkey (BIM and Migros), and Poland (Jeronimo Martins and Eurocash SA). Lenta's EV/EBITDA ratio is at 10.7x-12.2x vs. 11.3x for Magnit, 8.6x for Okay Group, 11.6x and 11.0x average for Turkish retailers and Polish retailers, respectively. Lenta is expected to generate positive cash flow in 2016, while investment development will keep negative cash flow in 2014-2016. Its advantages are standardised franchise and business processes, low costs, high share of private labels sales.
Lenta is going to hold an IPO in London to be followed with a listing in Moscow. The amount of the offering will be determined based on demand and market situation. The shares held by TPG investment fund (49.8%), EBRD (21.5%), and VTB Capital Private Equity (11.7%) could be proposed.