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Retail

Russia's Magnit May Double Buyback Offer After Strong Demand, Sources Say

By Reuters
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Russia's Magnit May Double Buyback Offer After Strong Demand, Sources Say

Russian retailer Magnit may increase its offer to buy back blocked shares at a discount by around double after seeing strong demand from Western investors keen to exit Russian holdings, two sources familiar with the matter told Reuters.

The offer to buy back shares a 50% discount is the first proposal of its kind by a Russian company since sweeping Western sanctions over Moscow's invasion of Ukraine and subsequent Russian countermeasures deprived many foreign investors of the ability to trade in Russian securities.

Strong demand and positive feedback from so-called unfriendly investors - those from countries that imposed sanctions on Russia - has led Magnit to consider widening the offer from 10% currently, the sources said, who asked to remain anonymous due to the non-public nature of the information.

Magnit did not respond to a request for comment.

Should Magnit's offer succeed, it could open the door for other companies to follow suit and allow Western investors to recoup more blocked funds, the sources said.

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More than 60% of Magnit's shares are free-float, with shareholders including major Western asset managers such as Blackrock, Pictet and Dodge & Cox, according to Refinitiv data.

"Finally, someone has given big and institutional investors an opportunity to exit assets in Russia, in which they have no prospects," one of the sources said. "Everyone likes the fact that you can exit not only in roubles, but also in euros and dollars and to foreign accounts.

"So far, no one has offered this."

Voluntary Tender Offer

Magnit first announced the tender offer, in which its wholly-owned subsidiary Magnit Alyans would buy up to 10,191,135 of Magnit's shares at 2,215 roubles per share, on 16 June.

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Magnit received approvals from the Russian government, which demands 50% discounts on asset sales involving foreigners, including the option for investors to receive funds in roubles, dollars, euros or yuan in bank accounts in Russia or abroad.

Evaluating which currencies most investors are favouring is futile at this stage, said a second source, comparing it to measuring the average temperature in a hospital.

"Every investor evaluates risk differently, which currency is better or worse for them," the source said.

Crucially, the deal would enable investors to extricate funds from special "type-C" accounts, access to which is blocked unless Russia grants waivers.

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"The deal is structured in as comfortable and friendly a way as possible for Western investors, especially considering the current environment," the second source said.

News by Reuters, edited by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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