Lenta shareholder offers to buy out rivals TPG and VTB

MOSCOW (Reuters) – The corporate battle over Russian hypermarket chain Lenta edged closer to a conclusion on Saturday as its biggest shareholder said it offered to buy out rivals, U.S. private equity firm TPG and bank VTB (VTBR.MM: Quote, Profile, Research).

August Meyer, who with partners owns around 44 percent of the St Petersburg retailer, has been locked in a near year-long conflict with TPG (TPG.UL: Quote, Profile, Research) and Russia’s second biggest bank over who should be chief executive of the group.

Lenta had previously been touted as a likely takeover target as Russia’s fragmented retail sector began to consolidate, with U.S. giant Wal-Mart (WMT.N: Quote, Profile, Research) seen as a possible buyer.

Russia’s X5 (PJPq.L: Quote, Profile, Research) and Dixy (DIXY.MM: Quote, Profile, Research) have both completed major acquisitions in recent months as grocers battle to grab share of the rapidly growing sector.

But the Lenta conflict — which echoes much bigger Russian shareholder battles over mining giant Norilsk Nickel (GMKN.MM: Quote, Profile, Research) and mobile phone group Vimpelcom (VIP.N: Quote, Profile, Research) — has made a successful sale of the company unlikely.

Talks between the two parties have made little progress since the end of October, when the most recent CEO Jan Dunning left the company.

But U.S. born Meyer’s investment group Svoboda said in a statement he now wants to buy out the TPG/VTB alliance — which operates under the name Luna — and would pay $800 million for their 30.8 percent stake.

“We propose to end this war, which has already caused significant damage to the company’s business and created a threat to the investment climate in St Petersburg and Russia,” Meyer associate Dmitry Kostygin said in a statement.

Svoboda said it had valued Lenta at $2.9 billion minus $300 million debt based on a ratio of 11.6 times Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA), and would keep the offer open until March 15.

Kostygin told Reuters that Svoboda plans to pay for the VTB/TPG stake with Lenta shareholders’ money, borrowed capital as well as funds from an unnamed financial investor who will get 10-15 percent of Lenta.

A spokesman for Luna declined to comment on the proposal. TPG also declined comment.

The European Bank of Reconstruction and Development (EBRD), which owns 11 percent of Lenta, could not be reached for comment.

(Reporting by John Bowker and Denis Pinchuk; additional reporting by Maria Plis; editing by Keiron Henderson)