7 Aug 2023 11:56

Sweden's Eastnine to sell 36% stake in owner of Zarina, befree brands for 15.6 bln rubles

MOSCOW. Aug 7 (Interfax) - Eastnine AB has signed an agreement to sell its stake of about 36% in fashion retailer Melon Fashion Group (MFG), which operates the Zarina, befree, Love Republic and Sela chains, for about 15.6 billion rubles, or approximately 149 million euros based on an exchange rate of 105 rubles/euro, the Swedish company reported.

The transaction is expected to be closed within two weeks, but its completion "is subject to significant uncertainties and risks," Eastnine said.

Eastnine said that it, together with other European shareholders in MFG entered into an agreement under which its entire investment in the retailer will ultimately be sold to the Russian company GEM Invest LLC, an investment company that emerged from former Gazprom executive Anatoly Paliy's Gem Capital.

The transaction will take place in several steps, which have been approved by the Federal Antimonopoly Service and the Governmental Commission for Control over Foreign Investments in the Russian Federation.

Eastnine said its investment in MFG was booked at approximately 162 million euros as of June 30, 2023.

A market source told Interfax in May that Gem Capital had received permission from the Russian authorities to acquire slightly more than 80% of shares in JSC Melon Fashion Group for about 500 million euros in a deal that valued the whole company at about 600 million euros.

The deal will be carried out in two stages, the source said. I.G.M. Manufactrust Ltd, the Cyprus-based company of MFG cofounder David Kellerman will first purchase shares in the retailer from Eastnine AG and MFG Intressenter, as well as from foreign minority shareholders with smaller stakes, thus increasing its stake in the company from about 34% to around 82%. Then the Russian entity of Gem Capital will purchase this whole stake from I.G.M. Manufactrust. Furthermore, the Russian authorities have required that part of the payment be spaced out over several months, and thus the purchase of the forex needed for payment will also be spread out over this period, the source said.

JSC MFG increased its net profit by 120% to 7.3 billion rubles in 2022 on revenue up 23.5% to 46.1 billion rubles. The company's CEO Mikhail Urzhumtsev also owns a 7.05% stake in MFG.

Gem Capital is engaged in private equity and venture capital investment. The company gained prominence in 2020 with the purchase of then-public company Volga Gas, but now the main assets in its portfolio are in the gaming, entertainment, nanotech and real estate sectors.