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VTB books nearly 5x on Lenta IPO

The partial sale of the Russian hypermarket, in which it invested alongside TPG, netted VTB a 72% IRR.

VTB Capital and TPG-backed Russian superstore Lenta has listed on the London Stock Exchange, raising $952 billion.

The business – whose unconditional shares will start trading on 5 March – was priced at $10 taking the company’s value up to $4.3 billion. The share price is at the lower end of the $9.50 and $11.50 price range set earlier this month.

VTB’s Tim Demchenko, VTB’s global head of private equity and special situations, disputed the price was impacted by the political upheaval in Ukraine. “Lenta is a Russian consumer story [and therefore] not affected by Ukraine,” he told Private Equity International.

As a result of the IPO, VTB has divested a fifth of its 11.7 percent stake in Lenta, which netted the firm a return of close to 5x and a 72 percent IRR, he said. TPG will divest approximately 11 percent of its 49.8 percent stake, while the European Bank for Reconstruction and Development (EBRD) will divest 4.8 percent of its 21.5 percent stake, according to a Lenta statement. 

The investment was a good example of how a US buyout firm can work with a Russian-based investor, Demchenko said. “We are very pleased with this deal. The IPO is a great result and it has generated a wonderful return, but more importantly, we hope this will encourage international investors to do more deals in Russia in partnership with us.”

VTB backed the company in 2009, when it bought 6 percent of the business. In 2011, it teamed up with TPG and EBRD to acquire another stake in Lenta in a $1.1 billion transaction. It was the largest private equity deal agreed in the country for three years and exceeded the total amount of investment in Russia in all of 2010.

For VTB, which invested $125 million in Lenta, it marks one of its largest deals in terms of the capital it deployed, Demchencko said.

Lenta currently operates 77 hypermarkets in 45 cities across Russia plus 10 supermarkets in the Moscow region, making it Russia’s second-largest hypermarket chain, according to the company’s website.