Russian grocery group seeks £1bn London listing

Click to follow

A Russian grocer worth an estimated $2bn (£1.1bn) unveiled plans yesterday to seek a listing on the London Stock Exchange.

A Russian grocer worth an estimated $2bn (£1.1bn) unveiled plans yesterday to seek a listing on the London Stock Exchange.

Pyaterochka Holding is aiming to tap into the shift in sentiment towards Russian companies. Investors recently clamoured to buy into the conglomerate Sistema in the largest initial public offering by a Russian group anywhere in the world.

The Dutch-registered supermarket chain, based in St Petersburg, was founded six years ago by Andrei Rogachev, one of the country's 100 richest oligarchs. A listing will enable Mr Rogachev and his three partners - Alexander Girda, Tatyana Franous and Igor Vidiaev - to cash in part of their fortune, although the company declined to say how much money it hoped to raise.

To date, Pyaterochka has concentrated its firepower on Russia's two most lucrative markets, St Petersburg and Moscow, where it has 235 stores, but it is also rolling the brand out across the country with the help of franchisees. It has a further 207 outlets dotted in the "provinces", as it terms anywhere outside the two consumer centres, in Kazakhstan and Ukraine.

The group has appointed a former Somerfield director, David Noble, as chairman in the hope that a Western face will help it to woo mainstream institutions as well as emerging market funds. It is planning to list via global depository receipts, usually reserved for secondary listings, although London will be its main listing. It is banned from floating on the RTS, the main Russian market, because it is registered in the Netherlands.

Pyaterochka, which has hired Credit Suisse First Boston and Morgan Stanley to handle the listing, has eschewed the big-box hypermarket format beloved by European supermarket groups and chosen to open smaller, so-called neighbourhood stores. With a turnover of $1.1bn, it is the country's biggest retailer in terms of sales, although it has just 1 per cent of the total Russian food market. In the 12 months to December 2004, net profit was $75m.

Strong economic growth, lower inflation and soaring real incomes have fuelled a consumer boom in Russia. Smart shops in the vein of those found on Oxford Street or New York's Fifth Avenue are replacing the open-air markets, kiosks and counter-services stores of the Soviet era.

Oleg Vysotsky, Pyaterochka's chief executive, said: "We see further potential for rapid growth in Russian retailing in the coming years as disposable income increases and we are well positioned to benefit strongly from this."

While foreign retailers have fallen over themselves in the scramble to conquer the Chinese market, most of the big names have shied away from Russia, fearful of a repetition of the 1998 economic crisis and President Putin's oft-heavy handling of the business world. The Big Three - Wal-Mart, Carrefour and Tesco - have yet to dip a toe into Russian food retailing, leaving it to Auchan, the French hypermarket operator, Germany's Metro cash-and-carry group, and Migros Turk, Turkey's biggest food retailer and the operator of Russia's Ramstore hypermarket chain. Elsewhere on the high street, foreign retailers have been braver. Burberry, the luxury goods group, Monsoon, the womenswear chain, and Kingfisher, the DIY group behind B&Q, all have plans to open stores in Russia.

Potential investors in Pyaterochka will follow the lead set by the European Bank for Reconstruction and Development, which took an undisclosed stake in the group in 2001. The bank sold out last year, quadrupling its investment, according to Mr Noble. The EBRD still has a $36m loan outstanding to the group.