Marathon Group has bought nearly 12 percent in Russian food retailer #Magnit. Alexander #Vinokurov, president of this investment group, spoke on the deal terms and plans to develop the retailer in an interview with RBC.ru.
— It was quite recently, in February 2018, when #VTB acquired a stake in Magnit. And now it is yours. Have you participated in negotiations with Magnit founder Sergey Galitsky from the very beginning?
— These are two different deals. We found out about the deal between VTB and Sergey #Galitsky just like anybody else, after it was announced. We got interested in buying a part of their [VTB’s] stake.
— And when did you get interested? According to official statements, it took more than half a year to prepare the deal between VTB and Magnit but you were much faster.
— It happened straight after the deal between the bank and Mr. Galitsky was finalized. We, as an investment company, must be able to react quickly to opportunities emerging in the market. So, we saw the opportunity and took the chance.
Commenting on the deal terms, Mr. Vinokurov explained they bought a little more than 12 million shares (11.82 percent of the authorized capital) worth above RUB62.5bn (about $1bn). The deal was cash-based and structured as repo with both equity and debt financing. VTB acted as the main creditor.
— Why does Marathon need Magnit? Taking into account your previous experience of working in A1, why not X5 Retail Group which is also a part of Alfa Group? I assumed you know X5 Retail Group business much better.
— Magnit is a largest global-scale retail chain. This is a strategic investment for Marathon Group. The retail market is a fast changing and a promising one with lots of opportunities. We were interested in this market from the first day of our group’s existence. We view Magnit as a brilliant investment opportunity. I am sure this chain is currently underestimated and it is only starting its ‘marathon’. With a number of clear measures we could significantly boost its value in the foreseeable future.
Alexander Vinokurov added he did not meet with Sergey Galitsky in person but hopes to do so. “Only a very strong businessman could establish a company like that,” said Vinokurov.
He also announced a new corporate governance system is being introduced in Magnit at the moment. They have already elected a new board of directors. The new shareholder will participate in the company’s management in line with the best global practices, via the board of directors and a shareholder meeting according to Marathon’s stake in the share capital. Another partner of Marathon or VTB in Magnit is theoretically possible but there are no plans like this at the moment.
— Do you consider the stake acquisition in Magnit as a long-term investment or do you plan to sell it sometime later?
— This is a long-term investment. The retail market is among our strategic interests. We are more likely to increase our stake in the medium-term than sell it.
— Do you plan to change Magnit’s positioning, pricing category, etc, in cooperation with VTB?
— We will work with other Magnit shareholders, including VTB, to maximize the company’s value. The company is currently developing a new development strategy, but it is too early to comment in more detail.
— Do you plan to use your drugstore chain to develop Magnit in this segment?
— Mega Pharm is our partnership project with с Х5 Retail Group and we develop it as we stated earlier. There are no plans for cooperation between Magnit and Mega Pharm but Magnit’s drugstore business is being discussed as part of other strategic initiatives. This decision is up to the board of directors and top managers.
— Prior to this deal, Elena Milinova was appointed Magnit Financial Director. Earlier, she was responsible for a similar business segment in Marathon Group. Was it you who recommended Elena for Magnit?
— Elena was invited by one of Magnit top managers. You should not forget she was Х5 Retail Group senior finance director before coming to Marathon. I wish Elena all the best.
— So it turns out you will develop a project of your former employer’s key competitor? What is the view of Alfa Group shareholders on your deal with VTB?
— I have a lot of respect for Mikhail Fridman and German Khan and in many respects they were my teachers. I believe they treat this deal with interest. But you better ask them.
— Is there a chance that Magnit will be merged with other retail assets. For example, VTB has a stake in Lenta. Or are you going to propose to Alfa Group and buy its X5 Retail Group?
— Well, nothing is impossible but, as far as I know, this is not on the agenda.
What we know about Alexander Vinokurov and Marathon Group.
Alexander Vinokurov Born in Moscow on 12 October 1982
In 2004, he graduated from Cambridge University (Economics) where he founded a student organization called the Russian Cambridge Society. The same year, he started to work for Morgan Stanley’s investment banking division in London.
In 2006, he was appointed Vice President of TPG Capital fund and co-founded the Russian office of this fund.
In 2011, he becomes Summa group president
In 2014, he was appointed head of A1, an investment arm of Alfa Group
In 2017, together with partners Sergey Zakharov and Andrey Tyasto, teammates from A1, he founded Marathon Group investment company.
Alexander is married to Yekaterina, daughter of Russian Foreign Minister Sergey Lavrov
Marathon mainly targets deals in four segments, i.e. pharmaceuticals, FMCG and retail, transport infrastructure and agriculture.
Marathon Pharma, a subholding of Marathon, includes production facilities Sintez, Biokom, Fort, Bentus Laboratories, SIA Group distributor and Mega Pharm (operates drugstore chains A-Mega, Yes, I am healthy and Azbuka Life).
In August 2017, Marathon reached an agreement to unite its pharmaceutical assets under the umbrella of state-controlled Rostekh, in order to create a federal-scale producer and supplier of medicines. As part of the deal, Marathon will get 25 percent in Natsimbio and Rostekh will get 49 percent in SIA Group.
Marathon Sport, another subholding of Marathon, includes Section Sports Club (set up by the investment group together with Petr Zhukov, the son of first deputy chairman of the Russian parliament Alexander Zhukov). Other assets of the sport subholding are IQSport (provides sport support and consulting in five sports areas) and professional Marathon-Tula Cycling team.