April 13, 2018 / 11:31 AM / 2 years ago

UPDATE 2-MediaMarktSaturn in talks over Russian business options

* Ceconomy in talks to sell MediaSaturn to Russian peer M.video

* MediaSaturn would concurrently take minority stake in M.video

* Ceconomy struggling in Russian market (Adds confirmation of talks by Ceconomy)

By Tatiana Voronova, Matthias Inverardi and Arno Schuetze

MOSCOW/DUESSELDORF, April 13 (Reuters) - Consumer electronics group MediaMarktSaturn is considering a sale of its Russian operations, which are facing tough competition, its parent company Ceconomy said on Friday, confirming a Reuters report.

MediaSaturn is currently in discussions with Russian peer M.video about a potential disposal of its Russian retail business and a concurrent acquisition of a minority stake in M.video, Ceconomy said in a statement.

“If and to which conditions the transaction will be signed is uncertain at this point in time,” Ceconomy added.

Russia’s top two electrical goods and home appliances retailers — M.video and Eldorado — are currently preparing to merge and adding MediaSaturn could solve Ceconomy’s problems with the shrinking unit, people close to the matter had told Reuters earlier.

Ceconomy said in January that one of its priorities for this year was improving its performance in Russia, noting it had already initiated cost savings and store size cuts, adding it was seeking a “strategic answer” by the end of 2018.

The Russian retail market has been recovering from a slump, supported by falling interest rates and slowing inflation, and M.video’s sales grew 8.2 percent to 234 billion roubles ($3.80 billion) in 2017 when it opened 27 new stores.

M.video and Eldorado are majority owned by Russia’s Safmar, which is controlled by the family of oil-to-real estate tycoon Mikhail Gutseriev. M.video said last month it would buy Eldorado in a deal expected to close in the second quarter.

Gutseriev was in talks to sell a 15 percent stake in the merged company to Media Saturn and use the proceeds to acquire MediaMarktSaturn’s Russian business, which operates under the MediaMarkt brand, a source at a Russian state bank said.

M.video declined to comment, while Eldorado was not immediately available for comment and Safmar declined immediate comment. Ceconomy, which split last year from German retail conglomerate Metro, was not available for comment.

One person close to Ceconomy said it has been working on finding a solution for its Russian business, which is subscale and will likely come under more pressure as a result of the M.video-Eldorado deal.

Ceconomy usually aims for complete control of a business, so any deal involving a minority would likely only be an intermediary step, the person said, adding that a sale to the Russian group may throw up antitrust issues.

Ceconomy’s sales in Russia fell by 7 percent to 526 million euros ($649 million) in the 2016/17 financial year as it closed five stores to bring the total to 57. ($1 = 0.8109 euros) ($1 = 61.5825 roubles) (Additional reporting by Maria Kiselyova; editing by Emma Thomasson, Alexander Smith and David Evans)

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