Magnit announces approval by the Federal Antimonopoly Service of the DIXY business acquisition

Magnit announces approval by the Federal antimonopoly service of the dixy business acquisition

Krasnodar, Russia (July 15, 2021): Magnit PJSC (MOEX and LSE: MGNT; the Company), one of Russia's leading retailers, announces it has received an approval from the Federal Antimonopoly Service ("FAS") in connection with the acquisition of 100% shares of the DIXY Holding Limited (Cyprus) by JSC "Tander", main operating vehicle of Magnit. 

Assets acquired

According to the agreement Magnit acquires a holding entity for a group of companies that operate convenience stores under the DIXY brand and superstores under the Megamart brand in three federal districts. As part of the transaction Magnit will also acquire distribution centers and a truck fleet. Total number of stores in the perimeter of the deal will account for around 2,500 outlets. Detailed breakdown of assets will be available at the deal closing.

Approvals and closing

The agreement has been approved by Magnit's Board of Directors on May 18, 2021[1]. No further approvals after today's clearance by Federal Antimonopoly Service are required. Parties aim to satisfy all other conditions to close the transaction shortly. Further announcement will be made in the due course.

According to the FAS prescription, the Company will need to comply with the 25% market share limit in the specific number of municipalities[2]. As a result, 142 DIXY convenience stores in 53 municipalities will be excluded from the deal perimeter and hence will not be acquired by Magnit. These stores are located in small municipalities in the North-West and Central regions and none is located in Moscow or St. Petersburg keeping strategic rationale of the deal fully unchanged.

In addition to that, according to FAS prescription, the Company will have to reduce one-time its market share limit to 35% in 22 municipalities till 1st July 2022. This may potentially imply very limited number of store closures in the respective areas. The Company will conduct a detailed analysis of operational and financial performance of stand-alone outlets on a case-by-case basis aiming at potential adjustments to its existing network or recently acquired stores under the DIXY brand. The company doesn't expect any significant changes to its market positions and financial performance in 2021 or going forward as well as its store opening guidance.

Given the scale of the transaction and its effect on the combined market positioning the Company in a proactive manner has taken additional responsibilities to keep specific mark-up on certain fresh-food SKUs from the list of socially important product categories[3]. Within one year since completion of the transaction Magnit will maintain quarterly average 0% mark-up for one entry price SKU in each of the following product categories: poultry, milk, bread. This commitment will cover the entire Magnit network. The Company has also agreed that special terms for pensioners under Magnit's loyalty program will be available for DIXY and Megamart customers.

Magnit's overall pricing policy implies very low mark-up for certain entry price socially important articles, which is in line with additional responsibilities taken now. The Company believes that consumers will benefit from affordable offering of socially important goods making its overall perception and attractiveness even stronger. Magnit's flexible financial position, further profitability improvement and potential post-deal synergies in category management, combined sourcing and other business processes allow to maintain its short-term and long-term operational and financial guidance, including gradual profitability improvement, without any changes.    



[1] https://www.magnit.com/en/disclosure/regulatory-news/#tabs-Disclosure;

[2] According to the Competition Law of the Russian Federation N 135-FZ as of 26 July, 2006;

[3] The list of socially important articles was approved by the Russian Government (decree N530 as of 15 July, 2010)