Magnit PJSC, one of Russia’s leading retailers, has completed an acquisition of the DIXY retail chain with 2,477 stores in Russia, including 39 superstores under the Megamart brand. The majority of the convenience stores are located in Moscow and the Moscow region (1,319 outlets) and in St.Petersburg and the Leningrad region (438 outlets). The remainder of the stores in the convenience format is located in the Urals Federal District. Most of the superstores operate in the Sverdlovsk region (35 outlets) with 4 stores located in the Tyumen region. The stores are comparable in terms of size with existing Magnit convenience (298m² for Dixy vs 342m² for Magnit) and superstore (2,013m² for Megamart vs. 2,002m² for Magnit) formats. As part of the transaction, Magnit has also acquired five distribution centres and a fleet of approximately 700 trucks.
The acquisition of the retail business of DIXY, the fifth-largest grocery retailer in the country, is expected to significantly strengthen Magnit’s competitive position in the Russian food retail sector. Strong exposure to the strategically important Moscow and St.Petersburg regions, which account for approximately 29% of the total Russian food retail market, will lead to a sharp increase in the company’s market positions in both capitals, including more than two-fold market share growth in both Moscow and St.Petersburg. Strong physical presence in Moscow and St.Petersburg will provide substantial support to further development of Magnit’s e-grocery initiatives.
The purchase price at closing amounted to €1.01bn (RUB 87.6bn). The DIXY business is expected to remain a separate legal entity with the stores operating under the existing brands. Dixy’s current management will continue running the business while Magnit welcomes frontline, supply-chain and head office employees to join its team.
Depending on the quality of locations, the overlap with the existing Magnit stores, operational and financial performance, some adjustments to the Dixy and Megamart chains are possible at a later stage. This may potentially result in a limited number of closures, transformation into Magnit convenience, supermarket, drogerie formats or a hard discounter concept, store redesign or reformatting to dark stores.
Charles Ryan, Chairman of the Board of Directors, commented: “This transaction is a testimony to the structural changes in the Russian food retail industry and a mark of the success of Magnit’s turnaround story. The Company has developed sufficient financial flexibility to execute an ambitious expansion program, combined with selective bolt-on acquisition opportunities and exploration of promising new niches. The Board is fully confident that this deal will benefit our customers and provide value to all our shareholders.”
Jan Dunning, President and CEO of Magnit, commented: “We are delighted to complete this strategically important transaction. We are now focused on executing gradual integration which is the largest incorporation of acquired assets in the history of the Russian food retail industry. At the same time, this process will not affect Magnit’s own expansion program and its ongoing retail and digital transformation. We expect to achieve the first quick wins by year-end 2021 and complete the integration process with the extraction of all strategic synergies in the second half of 2022 or the first half of 2023. Above all, retail is about people. We are pleased to welcome a team of over 40,000 strong professionals at Dixy to the Magnit family. I have no doubt that merging two strong corporate cultures will reinforce the best of our leadership capabilities and help us to build a unique winning culture in the Russian food retail sector.”