TPG adds Russian retailer to shopping cart

TPG Capital, the world’s largest private equity firm according to the PEI 300, has again teamed with a local private equity player to buy into an emerging markets-based supermarket chain.

TPG has partnered VTB Capital, the private equity affiliate of Russian state-backed bank VTB, on the purchase of a 35.4 percent stake in Russian hypermarket chain Lenta. Financial details were not disclosed, though media reports in September suggested the deal was worth between $110 million and $115 million.

The transaction follows a $213 million PIPE deal in August for Chinese supermarket chain Wumart. TPG teamed with Chinese private equity firm Hony Capital and its parent, Legend Holdings, to buy the 11 percent stake in Beijing’s largest supermarket chain.

Lenta: The latest item on TPG’s shopping list

Lenta is Russia’s fifth-largest retailer, having made $2.34 billion in profits last year. It operates 36 “hypermarkets”, or supermarket-department store combos, 14 of which are in St. Petersburg.

A joint statement from the firms today ends well over a year of speculation as to whom and how much Lenta would sell.

In July 2008, the St. Petersburg Times reported Lenta wanted to sell everything not owned by the European Bank for Reconstruction and Development, or 89 percent, to numerous bidders that were rumoured to include Wal-Mart, Carrefour, BC Partners and TPG.

Reports began to surface last month that a 35.4 percent stake had been sold to TPG and VTB, though reports last week suggested minority Lenta shareholder Moore Capital Management, a US hedge fund, would disrupt the deal.

“The experience of VTB Capital in arranging deals in the Russian market allowed the successful closure of the deal despite the fact that a number of investors also sought to acquire the stake,” TPG and VTB said in a statement.

The deal is TPG’s second since setting up in Moscow in 2006. Its first was in April 2008 when it wrote an $800 million equity cheque – the country’s biggest private equity deal ever – for a 50 percent stake in SIA International, the largest pharmaceutical distributor in Russia.

The firm had also reportedly been close to purchasing a controlling stake in Seventh Continent, Moscow’s largest grocery chain, but the deal fell through in early 2008.

TPG’s Russian office has been overseen by emerging markets head and former London-based senior partner Stephen Peel. Peel – whose wife is Russian, according to a profile in UK newspaper The Times – had moved to Moscow to lead the firm’s efforts, but in January took over TPG’s emerging Asian operations, as well, and was expected to move to Hong Kong.