Food Retailer Magnit Aims to Raise $550M in London

Magnit, the country's third-largest food retailer, said on Wednesday that it aimed to list on the London Stock Exchange to finance more hypermarkets and discount stores.

Magnit, which is already listed in Russia, could raise about $552 million, based on its current share price. It plans to offer 11.3 million shares in the form of Global Depositary Receipts.

The company raised $368 million in a domestic initial public offering in 2006, selling 19 percent of its shares at $27 each.

Magnit, which opened its first hypermarket store in October, had a 1.9 percent share of the country's fragmented food retail market in 2007.

The food sector grew 32 percent last year to $191 million, or $1,330 per capita, and UBS analysts expect it to grow 21 percent a year on average in the next three years.

The top 10 players control only 12 percent of the market, and the entry of global giants such as Wal-Mart and Carrefour is likely to spur consolidation, analysts say.

Magnit's bigger domestic rival X5, which manages the Pyatyorochka and Perekryostok grocery chains, for example, has acquired Kama to gain control over 29 stores.

Shares of Magnit have surged 80 percent since the IPO to trade at 29 times 2008 earnings -- in line with X5 Retail despite a lower earnings before interest, tax, depreciation and amortization margin of 4 percent, versus X5's 6.3 percent in 2007.

Magnit operates five hypermarkets, with an average size of 4,000 square meters and plans to open five to 30 hypermarkets and 300 discount stores this year.