Russia’s largest supermarket group X5, which owns the Pyaterochka and Perekrestock chains, is considering issuing new shares to finance its agressive expansion plans, the group said in a statement today (30 March).
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These funds, X5 said, could then be used to finance the acquisition of Russian hypermarket operator Karusel. X5 has the option to purchase 100% of Karusel, which it can exercise between January and June 2008.
“If we were to undertake the acquisition of Karusel or other operations, these initiatives would require additional capital, and we are currently reviewing the possibility of a secondary offering,” CEO Lev Khasis said in the statement. “We expect to make a final decision about our financing strategy in the course of the next two months.”
Analysts said the company is eager to acquire Karusel as part of its expansion plan in Russia’s booming hypermarket segment. “If they exercise the option they are going to need additional financing,” a Moscow-based retail analyst told just-food.
With 19 hypermarkets, Karusel plans to open 25 stores this year and up to 50 by 2009. X5 itself hopes to open 70 new hypermarkets in the next five to seven years, Brady Marin, a consumer analyst with Alfa Bank in Moscow, said.
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By GlobalData“X5 is expanding very aggressively and they want to be a leading player in the hypermarket segment,” Marin told just-food.
According to Marin, X5 has outstanding debt of US$1.1bn and wants to spend $700m to expand its business this year.
An analyst at Troika Dialog research told just-food today that X5 was likely to look to raise between $800m and $1bn through the share issue.
The company trades on the London Bourse with a GBP3.1bn market capitalisation. Troika Dialog predicted that the company’s expansion will sharply boost this year’s profits, lifting its share price to $40.25 from $29.70 in the next 12 months.
