Russian food retailer O'Key confirms talks with Sberbank

FILE PHOTO: People are seen at the entrance of Russia's lender Sberbank headquarters in Moscow, Russia January 30, 2018. REUTERS/Tatyana Makeyeva/File Photo

MOSCOW (Reuters) - Russian mid-sized food retailer O’Key said on Friday that Russia’s largest lender Sberbank had expressed interest in its hypermarket business.

State-controlled Sberbank is in talks to buy O’Key, six industry sources told Reuters on Thursday. One of the sources said that O’Key’s discount chain Da! could be left out of the possible deal.

O’Key’s board of directors “confirms that it is evaluating various directions for development and strategic options for the company’s hypermarket business, including an indication of interest in this business from Sberbank,” O’Key said in a statement on Friday.

This evaluation is at a preliminary stage and no definitive proposals or decisions have been made, it added.

The talks follow a decline in the shares of many Russian food retailers over the past year and expectations of sector consolidation because of tougher regulation and a decline in Russian consumers’ disposable incomes.

O’Key currently has a market value of about $554 million. The company has held talks with various parties in recent years over a sale of its hypermarkets.

If Sberbank agrees to buy O’Key, it could then sell it to another investor, one of the industry sources and a source close to Sberbank management told Reuters on Thursday. They did not disclose the name of the potential investor.

Reporting by Polina Devitt; editing by Keith Weir