Vekselberg Snaps Up Stake in Retail Chain

The Moscow Times

Viktor Vekselberg's Renova Capital has entered the burgeoning domestic retail market, snapping up a blocking stake in a Moscow-based supermarket chain, the company said Thursday.

Renova Capital bought 25 percent in SPAR Moscow Holding, which owns 18 SPAR supermarkets in the city and the Moscow region, from U.S. venture fund Delta Partners for an estimated $15 million.

Together with other shareholders, Renova plans to "open new stores and make acquisitions" of other local supermarket chains to "actively develop the SPAR brand in central Russia and in Moscow," Oleg Tsarkov, Renova's managing director, said in an interview.

Renova is already in talks to acquire new retail outlets, Tsarkov said, declining to give further details. "In the regions, we see that the company that comes in first gets the spot," he said.

Delta and Renova did not disclose the financial details of the deal, but Maria Davydova, an analyst with FIM Securities, estimated that Vekselberg's fund paid from $10 million to $15 million for the stake, with the upper limit more likely due to SPAR's central locations in Moscow and the Moscow region. Two market players with good knowledge of the sector confirmed the estimate.

Retail is one of the country's fastest-growing sectors. It grew by 12 percent to $245 billion in 2005, according to UralSib brokerage data.

Compared to giants like Pyatyorochka, SPAR still has a small presence on Russia's grocery market, which ranks in the top 10 of the world. However, only 6 percent of the food market in Russia is currently controlled by chains, which leaves plenty of room for expansion.

"Growing consumer income, development of consumer financing and under-saturated private consumption mean the food retail sector could expand at an average of 10 percent per year for the next six to eight years," said Andrei Nikitin, an UralSib analyst.

The franchise for SPAR's Russian operations was acquired by Delta Partners in 2000, but the U.S. venture fund later sold the chain's non-Moscow operations -- ones focused on the Volgo-Vyatsky region -- to Perekryostok.

In 2003, Delta sold a stake of close to 70 percent in SPAR Moscow to a group of investors headed by Dmitry Budakov, who is also the managing director of Moscow Mortgage Agency, a division of Bank of Moscow. Budakov remains the majority shareholder in SPAR Moscow, with a small stake also held by entrepreneur Dmitry Maslov.

Renova, together with Budakov, have "a broad business connectivity" with knowledge of real estate and sizeable investment potential, which would "allow the business to step up a gear," said Paul Prince, managing director at Delta Partners.

Currently, four franchise operators run 62 stores under the SPAR brand in Russia. In 2005, they recorded over 200 million euros ($252 million) in sales.