March 22, 2018 / 3:28 PM / in 3 months

Russia's M.Video, Eldorado merge in $800 million deal

(Reuters) - Russia’s electrical goods retailer M.Video (MVID.MM) and rival Eldorado, both owned by Safmar Group, have been merged in a 45.5 billion rouble ($798 million) long-expected deal.

FILE PHOTO - A woman walks in front of a store of Russia's biggest electrical and white goods retailer M.video in Moscow, Russia April 15, 2016. REUTERS/Maxim Zmeyev

Safmar, controlled by the family of oil-to-real estate tycoon Mikhail Gutseriev, had said it had planned to merge M.Video with Eldorado as early as January, 2017. The combined company plans to keep two brands and competing retail networks.

Safmar will also keep the combined company listed. M.Video said it would offer to buy shares from those shareholders who oppose the deal at 401 rubles per share.

The combined company’s revenue is expected to reach 450 billion rubles in 2022 and EBITDA margin rising over 6 percent.

“This will be one of the largest transactions in the Russian retail sector and will create a highly efficient player in the consumer electronics market,” M.Video’s Board Chairman Said Gutseriev said in a statement.

    Since the combined company plans to enter the group of the largest electrical goods retailers in the world, it could seek better purchase prices, Alexandra Morozova, an analyst with Alfa bank, told Reuters.

    To close the deal in the second quarter of 2018, M.Video plans to take a loan of around 40 billion rubles. It agreed to borrow funds from VTB, the country’s second-largest lender. The price of the deal excludes Eldorado’s debt.

    The net debt to EBITDA ratio of the combined company is set to be 1.5 by the end of 2018, falling to 0.5 by the end of 2020.

    ($1 = 57.0520 rubles)

    Reporting by Maria Kiseleva and Olga Sichkar; Writing by Polina Nikolskaya and Denis Pinchuk; Editing by David Evans

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