OREANDA-NEWS. The European Bank for Reconstruction and Development (“EBRD”) is investing $125 million to purchase a minority stake in Lenta, a leading St. Petersburg-based food retailer, by subscribing to a new issue of the company’s ordinary shares. The transaction is the EBRD’s biggest equity investment in Russia outside the financial sector, reported the press-centre of EBRD.


Retail is one of the fastest growing sectors of the Russian economy and the EBRD investment will fund the group’s expansion beyond its St. Petersburg home-base by bolstering Lenta’s capabilities to acquire new land plots, as well as to construct, equip and launch its large-format food retail stores across Russia’s regions where 90 percent of the population lives.


Alain Pilloux, EBRD Business Group Director for Russia, said the Bank was pleased to continue supporting the regional expansion of Lenta, a company which has made financial transparency and good corporate governance a high priority. He described the transaction as a good example of long-term partnership with a successful Russian company. 
Sergei Yuschenko, CEO and General Director of Lenta, said EBRD’s equity investment was a sign of confidence in the group’s strategy, as well as in the growth prospects of the Russian retail market. This investment, by a first-class institutional investor like EBRD, will help establish Lenta as the market leader in its segment of large-format retail and help to finance its national expansion efforts, Mr. Yuschenko added.


The group, which was founded in 1993, operates 10 stores in St. Petersburg and has recently opened five stores in the Russian regions including two in Novosibirsk, and one each in Astrakhan, Tyumen, and Volgograd. The company has set itself the target of becoming a premier large-format Russian retailer nationwide in the next few years and has an extensive pipeline of hypermarkets in advanced stages of development. Its retail concept adapts to Russian conditions the best business models taken from leading food retailers around the world.


The equity investment is the third EBRD project involving Lenta, following two loans made in 2004 and 2006.  As part of the deal, the EBRD takes a seat on the firm’s Board of Directors and its Audit Committee. An EBRD representative thus joins current Lenta Board members Oleg Zherebtsov (Chairman), Sergei Yuschenko (CEO and General Director) and non-executive Directors including Loren Bough (shareholder), Greg Lykins (Main Street Trust, Inc.), Bill Woodard (former executive of Wal-Mart) and Rob Voss (former executive of Wal-Mart).


Other details of this transaction were not disclosed. Lenta has increased its retail sales from $653million in 2005 to $1,016 billion in 2006. In 2005, Lenta operated 58,100 square meters of sales area. Currently, Lenta has 103,000 square meters of sales area open throughout Russia. In the agribusiness sector alone, EBRD has to date committed more than ?4,5 billion in 320 projects across Central and Eastern Europe and the Commonwealth of Independent States. The EBRD is on May 20-21 holding its 16th Annual General Meeting in Kazan, capital of the Russian Republic of Tatarstan.