2 Aug 2010 17:17

August Meyer's Svoboda boosts stake in Lenta to 41%

MOSCOW. Aug 2 (Interfax) - Co-owner of the retail chain Lenta August Meyer and a consortium of investment funds TPG and VTB Capital have closed a deal for the sale to Svoboda - a Meyer structure - of 4.6% of the retailer's shares, increasing Svoboda's state to 41%.

Luna Holding, a joint TPG and VTB Capital company, retains 30.8%, a source close to the Lenta shareholders told Interfax.

Agreement on the deal was struck last autumn, when Luna bought up its stake from one of Lenta's founders, Oleg Zherebtsov, the source said. That was not an option for Svoboda, but an outright obligation, and the deal has nothing to do with the current Lenta shareholder conflict over management, the source said.

On July 29, Lenta announced the departure of General Director Ian Dunning and the temporary appointment to the post of minority shareholder Sergei Yuschenko. However, TPG and VTB Capital announced the change was not legitimate. At the board of directors meeting that appointed Yuschenko there were only Svoboda representatives in attendance - three board members out of eight - meaning there was no quorum, a source close to Luna told Interfax.

An arbitration court in London has upheld Svoboda's right to appoint a temporary general director for Lenta, as it is included in the retailer's shareholder agreement, another source close to Lenta shareholders told Interfax.

Prior to the court's ruling, Svoboda announced the intent to appoint Yuschenko on a permanent basis, a source close to the TPG-VTB Capital consortium told Interfax. He also said Luna was not challenging Meyer's company's right to select a temporary general director and would have been prepared to vote for Yuschenko if the issue had been put to a legitimate board meeting.

A Lenta board meeting was slated for Monday, August 2, Luna announced. "But it became clear beforehand that Svoboda is refusing to take part in it and, consequently, there will be no meeting. Luna representatives turned up at the meeting place anyway so as to avoid a repeat of the situation that Svoboda conducts a board of directors meeting that is not legally binding in the absence of a quorum," the company said in a statement. The European Bank for Reconstruction and Development (EBRD), owner of 11.1% of Lenta shares, supports Luna's position, Luna said.

Luna does dispute Yuschenko's appointment as permanent chief after August 31. If a new general director is to be appointed, that person needs international retail experience commensurate with Dunning's, the source said. Most board members were pleased with the work Dunning, who had come to the company from the Ukrainian branch of Metro Group (Germany), had accomplished.

Dunning arrived last November as comparable sales were falling, the source said. Under his leadership, comparable sales were up 18% year-on-year in Q1 and 22% in Q2, he said.

Lenta did not open any new stores under Dunning, Meyer said recently. Opening a new store takes roughly a year, and management before Dunning had not readied any new-store premises, the source close to Luna said.

Yuschenko has been on the Lenta board since 2005. He was the chain's general director from January 2007 to January 2008, but is now in the same post at Spar Retail, controlled by Alexander Mamut, which is licensed to develop the Spar chain in Russia.

Lenta has 37 outlets located in St. Petersburg, Novosibirsk, Nizhny Novgorod, Krasnodar, Omsk, and other towns. The chain is one of the ten largest food retailers by sales revenue in Russia. Sales revenue increased 9% to 55.6 billion rubles in 2009.