On January 28, Reuters reported that a state-owned Russian bank associated with the defense sector is in discussions to acquire the Russian consumer electronics retailer M.Video-Eldorado, as per sources cited by the Kommersant and Vedomosti newspapers.
The potential sale of Russia's largest electronics retailer to the sanctioned state bank Promsvyazbank could assist M.Video in resolving mounting debt issues, while also aligning a major publicly traded company more closely with the Russian government, according to insiders quoted in the newspapers.
A source from Kommersant suggested that the deal could be valued at 300 billion roubles ($3 billion).
The acquisition would grant Promsvyazbank, a financier of Russia's military-industrial complex, control over a retail platform during a period when President Vladimir Putin advocates for the defense sector to branch out into producing civilian consumer goods to spur economic diversification.
M.Video declined to comment on speculations, and Promsvyazbank did not respond to requests for comment. Reuters was unable to verify the ongoing negotiations independently.
Both companies are actively participating in the competition to develop online marketplaces in Russia, joining reputed e-commerce firms like Wildberries and Ozon, tech giant Yandex, and financially robust banks including leading lender Sberbank.
M.Video, known for selling consumer electronics and home appliances at its approximately 1,240 stores nationwide, has significantly expanded its online footprint since the onset of the COVID-19 pandemic.
Promsvyazbank, which offers similar products in collaboration with retailer Svyaz ON, also provides banking and financial services both online and offline.
Intense competition and high interest rates have put pressure on prominent retailers such as M.Video, which has been striving to enhance efficiency, including by introducing more compact store formats, according to INFOLine's general director, Mikhail Burmistrov, as quoted by Reuters.
In the first half of last year, M.Video reported a record net loss of 10.3 billion roubles ($104 million) and had total financial obligations of 91.0 billion roubles, according to the company's financial disclosures.
Given its substantial debt load, the news of seeking a buyer or a new significant shareholder was not unexpected, noted analysts from BCS World of Investment.
In a challenging environment, President Putin recently set a target for Russia's stock market capitalization to double by 2030, aiming for it to represent two-thirds of the country's GDP while it remains shut off from Western investments.
M.Video's stock dropped by 2.1% at 1414 GMT, after reaching a nearly four-month peak on Monday.
Reportedly, the CEO Bilan Uzhakhov took over as the majority shareholder of the group in July, indirectly controlling 53.63% of its shares through various entities, as per news agencies.
($1 = 98.5455 roubles)