Mercury Snaps Up 51% of Dixy Chain

Mercury, a closely held business group with interests in liquor, oil, real estate and weapons making, has made its first investment in retail, by snapping up a 51 percent stake in the Dixy supermarket chain, both companies said.

A company that holds Dixy founder Oleg Leonov's 50.96 percent stake in the chain will sell it to a Mercury unit, the companies said late Wednesday. The companies did not disclose financial details of the deal, which is to close by Feb. 1. The deal also has to be approved by the Federal Anti-Monopoly Service.

"Investment into the Russian retail sector presents a strategic interest for the Mercury group of companies," Mercury first vice president Sergei Katsiyev said in a statement issued by Mercury and Dixy. "We are going to use our abilities to create ... one of the largest players in the Russian food retail market."

Founded in 1991 by controlling shareholder Igor Kesayev, the Mercury holding is an eclectic collection of assets that includes a wine and cognac distillery, a stake in London-listed Russian oil firm Sibir Energy and Degtyarev plant, which manufactures missiles and machine guns.

Some analysts welcomed the deal, citing the company's robust financial results.

"We believe that the new owners will provide a massive boost to Dixy Group's development," Troika Dialog said in a research note to clients.

"The company has a strong financial and logistics platform, which may be used for active expansion of Dixy Group's retail chain and could provide synergy opportunities."

Mercury estimated that its total turnover would reach $8 billion this year. The distribution of fast-moving consumer goods will account for $5.5 billion of that amount, the company said.

Fyodor Rybasov, executive director at Dixy Group, struck a similar note, saying Mercury would retain the current management but that it also has "a lot of opportunities and resources" to further develop the chain.

On Dec. 1, Dixy ran 372 stores, most of them in the discount format. In May, it went public, raising $360 million to fund expansion. About 48 percent of its shares are freely floated.

Leonov said in the statement that he was "certain that the experience and resources of the new shareholder will allow the company to reach new heights in its development."

Rybasov declined to say why Leonov sold his stake, saying he would explain everything after the deal closed. He indicated that Leonov could get involved in other projects, saying he was a "dynamic person" and had a "lot of different ideas."

A Mercury spokesman, Sergei Smirnov, declined immediate comment Thursday.