DJ Magnit completes acquisition of DIXY
MAGNIT PJSC (MGNT)
Magnit completes acquisition of DIXY
22-Jul-2021 / 16:45 MSK
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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Magnit completes acquisition of Dixy
Krasnodar, Russia (July 22, 2021): Magnit PJSC (MOEX and LSE: MGNT; the Company), one of Russia's leading retailers,
today announces that it has completed an acquisition of the DIXY retail chain with 2,477 stores in Russia.
Assets acquired
According to the agreement Magnit has acquired DIXY Holding Limited, a holding entity for a group of companies that
operate 2,438 convenience stores under the DIXY brand and 39 superstores under the Megamart brand. The majority of the
convenience stores are located in Moscow and the Moscow region (1,319 outlets) and in St.Petersburg and the Leningrad
region (438 outlets). The remainder of the stores in the convenience format are located in the Urals Federal District.
Most of the superstores operate in the Sverdlovsk region (35 outlets) with 4 stores located in the Tyumen region. The
stores are comparable in terms of size with existing Magnit convenience (298sq.m for Dixy vs 342sqm for Magnit) and
superstore (2,013sq.m for Megamart[1] vs. 2,002sqm for Magnit) formats. As part of the transaction Magnit has also
acquired five distribution centers and a fleet of approx. 700 trucks.
Assets Federal district Number of Selling space[2] Ownership (leased Sales in 2020
stores (thousand, sq.m) /owned) (Rub, bn)
Stores 2,477 804 84% / 16% 273.6
Dixy brand Moscow, St.Petersburg Central, 2,438 725 90% / 10% 256.7
North-West, Urals
Megamart brand Urals (Sverdlovsk, Tyumen) 39 79 28% / 72% 16.9
Distribution Moscow, St.Petersburg, Urals 5 151 29% / 71% -
Centers (Chelyabinsk) Strategic rationale
The acquisition of the retail business of DIXY, the fifth largest grocery retailer in the country, is expected to significantly strengthen Magnit's competitive position in the Russian food retail sector. Strong exposure to the strategically important Moscow and St.Petersburg regions, which account for approx. 29% of the total Russian food retail market[3], will lead to a sharp increase in the Company's market positions in both capitals, including more than two-fold market share growth in both Moscow and St.Petersburg. Strong physical presence in Moscow and St.Petersburg will provide substantial support to further development of Magnit's e-grocery initiatives. Potential synergies in procurement, category management and various business processes are expected to benefit the Company's customers and provide value accretion for its shareholders. Approvals, financing and closing
The transaction has been approved by Magnit's Board of Directors on May 18, 2021[4]. Russia's Federal Antimonopoly Service announced its clearance to the transaction on July 15, 2021 and all other conditions to closing the deal have been met. The parties have closed the transaction through Magnit's main operating subsidiary JSC "Tander" having acquired 100% of shares in DIXY Holding Limited (Cyprus). The transaction was financed using Magnit's existing cash and available undrawn loan facilities. Deal value
The purchase price at closing amounted to Rub 87.6bn. Certain closing adjustments related to the number of stores acquired were made compared to the initial aggregate base transaction consideration. Further adjustments to the purchase price will depend on the net debt and working capital as per completion accounts to be agreed by the parties. The parties have agreed to include 2,477 stores in the deal perimeter, 174 less than previously communicated, with some outlets closed or opened since the original agreement was signed and another 148[5] excluded from the deal perimeter according to the FAS instruction and market share limit thresholds. Integration and potential synergies The DIXY business is expected to remain a separate legal entity with the stores operating under the existing brands. Dixy's current management will continue running the business while Magnit welcomes frontline, supply-chain and head office employees to join its team. Depending on the quality of locations, the overlap with the existing Magnit stores, operational and financial performance, some adjustments to the Dixy and Megamart chains are possible at a later stage. This may potentially result in a limited number of closures, transformation into Magnit convenience, supermarket, drogerie formats or a hard discounter concept, store redesign or reformatting to dark stores. These decisions will be made gradually based on extensive case-by-case studies of post-synergies economics. The same rationale may apply to Magnit's own store opening program in the respective regions, which may become subject to slight adjustments. While Magnit's team continues further analysis integration will start immediately with the key focus on deriving synergies in key business processes. The Company expects to see material synergies first of all in procurement and category management thanks to the combined purchasing power with national and local suppliers, as well as in direct import operations, seasonal and Magnit's exclusive product range. Given high loyalty to private labels and Magnit's own production capacity, certain synergetic effect may be achieved from combined sourcing and increased utilization rate of production facilities.
The Company will also start aligning all procedures in strategy and investment decisions, accounting, financing, treasury, internal audit, legal, marketing and other functions. Cross-synergies may be also achieved in IT and personalization as well as other technologies used in operational processes. Implications for FY 2021 and long-term guidance
The Company will start consolidating the newly acquired legal entity from July 2021. At this stage Magnit's full year 2021 store opening, redesign and capex guidance published on February 4th, 2021 remains unchanged. Based on further detailed analysis of the performance of the newly acquired stores the Company may decide to slightly adjust its organic store opening and refurbishment programs in the respective regions. It is expected that any adjustment, if and when it happens, will not lead to material impact on the Company's development plans.
Strong cash generation, further improvements in working capital and a healthy financial position will continue to support Magnit's expansion, redesign program and investments into efficiency projects. The Company's leverage at year-end is expected to remain at a comfortable level. The transaction will not limit Magnit's ability to continue strong dividend payments.
The Company's 2025 targets announced on February 18, 2021, including store openings, redesign, e-commerce development, margins, working capital improvement, leverage and dividend payments have also been confirmed without any changes.
Charles Ryan, Chairman of the Board of Directors, commented: "This transaction is a testimony to the structural changes in the Russian food retail industry and a mark of the success of Magnit's turnaround story. The Company has developed sufficient financial flexibility to execute an ambitious expansion program, combined with selective bolt-on acquisition opportunities and exploration of promising new niches. The Board is fully confident that this deal will benefit our customers and provide value to all our shareholders."
Jan Dunning, President and CEO of Magnit, commented:
"We are delighted to complete this strategically important transaction. We are now focused on executing gradual integration which is the largest incorporation of acquired assets in the history of the Russian food retail industry.
At the same time, this process will not affect Magnit's own expansion program and its ongoing retail and digital transformation.
We expect to achieve first quick wins by year-end 2021 and complete the integration process with the extraction of all strategic synergies in the second half of 2022 or the first half of 2023.
Above all, retail is about people. We are pleased to welcome a team of over 40,000 strong professionals at Dixy to the Magnit family.
I have no doubt that merging two strong corporate cultures will reinforce the best of our leadership capabilities and help us to build a unique winning culture in the Russian food retail sector."
For further information, please contact:
Dina Chistyak
Head of Investor Relations
dina_chistyak@magnit.ru
Office: +7 (861) 210 9810 x 15101
Media Inquiries Twitter
press@magnit.ru @MagnitIR
Note to editors
Public Joint Stock Company "Magnit" is one of Russia's leading retailers. Founded in 1994, the company is
headquartered in the southern Russian city of Krasnodar. As of March 31, 2021, Magnit operated 39
distribution centers and 21,900 stores (15,098 convenience, 471 supermarkets and 6,331 drogerie stores)
in 3,770 cities and towns throughout 7 federal regions of the Russian Federation.
In accordance with the audited IFRS 16 results for FY 2020, Magnit had revenues of RUB 1,553.8 billion
and an EBITDA of RUB 178.2 billion. Magnit's local shares are traded on the Moscow Exchange (MOEX: MGNT)
and its GDRs on the London Stock Exchange (LSE: MGNT) and it has a credit rating from Standard & Poor's
of BB.
Forward-looking statements
This document contains or may contain forward-looking statements that may or may not prove accurate. For
example, statements regarding expected completion of the transaction, sales growth rate and/or store
openings are forward-looking statements. Forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause actual results to differ materially from what
is expressed or implied by the statements. Any forward-looking statement is based on information
available to Magnit as of the date of the statement. All written or oral forward-looking statements
attributable to Magnit are qualified by this caution. Magnit does not undertake any obligation to update
or revise any forward-looking statement to reflect any change in circumstances. -----------------------------------------------------------------------------------------------------------------------
[1] Including Megamart and Minimart brands
[2] Warehouse space for distribution centers
[3] Data combined for Moscow & Moscow region and St.Petersburg & Leningradsky region for 2020 according to Rosstat;
[4] https://www.magnit.com/en/disclosure/regulatory-news/tabs-Disclosure;
[5] Including 142 stores under FAS instruction to comply with the 25% market share limit in 53 municipalities and 6 stores in the municipalities with combined share of top retailers above 50% -----------------------------------------------------------------------------------------------------------------------
ISIN: US55953Q2021 Category Code: MSCU TIDM: MGNT LEI Code: 2534009KKPTVL99W2Y12 OAM Categories: 3.1. Additional regulated information required to be disclosed under the laws of a Member State Sequence No.: 118236 EQS News ID: 1221023 End of Announcement EQS News Service =------------------------------------------------------------------------------------ Image link: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=show_t_gif&application_id=1221023&application_name=news
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July 22, 2021 09:45 ET (13:45 GMT)
