Ceconomy Nears Russia Deal, Considers Capital Increase
German consumer electronics group Ceconomy, which split off from wholesaler Metro AG last year, is expected to strike a deal within days to sell its loss-making Russian business to Safmar and take a 15% stake in Safmar's M.video, three people close to the matter said.
The group, which owns retail chain Media-Saturn, is considering a capital increase to finance the transaction and bolster its balance sheet, the people said.
One of them said it was mulling a capital hike of roughly 10 percent, which would raise around 280 million euros at the company's current market value.
Ceconomy had no immediate comment.
Ceconomy emerged last year from a split from Metro, which is now a food-focused retailer. Ceconomy retains a 10 percent stake in Metro, which has lost a third of its value this year as its Russia business has weighed on earnings.
The Kellerhals family, which holds a minority stake in Media-Saturn and has been at odds with the management of Ceconomy and Metro, has so far refused to sign off on profit transfers from Media-Saturn to Ceconomy, which has limited its access to cash to pay for the Russia deal.
Russia's top two electrical goods and home appliances retailers - M.video and Eldorado - are preparing to merge, and Ceconomy said in January it was seeking a "strategic answer" to its poorly performing Russian business by the end of 2018.
If a deal is concluded, Media-Saturn would pay about €258 million for the M.Video stake based on current exchange rates, although that could be cut depending on financial performance, Ceconomy had said in a statement earlier this month.
It had said that the transaction would entirely eliminate the operational losses of Media-Saturn's Russian business, but have a one-time hit to Ceconomy's net profit for the 2017/18 financial year of more than 100 million euros.
In April, Reuters was first to report that Media-Saturn was in talks with M.video about disposing of its Russian business.