Russia-based X5 Retail Group is said to be the most likely buyer for Russian grocery chain Sedmoi Kontinent, Kommersant.ru reports. The purchase will amount to between USD2.4 and USD4.1 billion and bidding has been put out to tender.
It will include the right to rent 130 of 160 stores with a total area of 450,000 square metres (4,800,000 square feet) for 15 years. After the purchase, Sedmoi Kontinent, owned by tycoon Alexander Zanadvorov, will reserve the rights for the use of its brand, valued at USD82 million by the Interbrand agency in 2008.
“Rental rates are currently exceeding the pre-crisis level. We find it unreasonable to develop the chain via new rented areas, rather than to cede the market share to a larger operator,” a source close to Zanadvorov told Kommersant. Zanadvorov declined to comment.
The payment for renting Sedmoi Kontinent’s shopping space may amount to USD350-600 per square metre annually, excluding VAT and operational expenditures, Jones Lang LaSalle Head of Street Retail Department Svetlana Yarovaya said.
X5 has reportedly offered to pay USD550 per square metre, or USD157.5-270 million a year and has won the tender as a result. However, it is less likely that X5 will buy the chain outright as it lacks funds and is undertaking a through consolidation of its business. Its last acquisition, the Moscow-based Kopeika chain, took over a year to be completely integrated into X5’s business operations.
