Russian retailer Magnit sold to state-owned bank VTB

Last week businessman Sergei Galitski announced he was selling nearly all his holdings in the company he founded, the retail and supermarket chain Magnit to VTB. Magnit, one of Russia's largest retail chains, has suffered in recent years from the notable contraction in household purchasing power. With its purchase of a 29.1 % stake, VTB will become the company's largest shareholder by far, as majority of the shares are on free float. The reported price of the share package, 138 billion rubles (2 billion euros), implied a small discount. The news surprised the markets, and Magnit's share price fell after the announcement, but have recovered lately.

VTB's purchase decision has caused some head-scratching. Some observers think that VTB may be considering exploiting Magnit's extensive outlet network for its banking services. By some estimates, the purchase of Magnit, which targets lower-income customers, could even be an effort to support government social policy. VTB has also earlier acquired companies outside its core business and it still has a significant stake e.g. in St. Petersburg's Pulkovo International Airport and teleoperator Tele2.

The acquisition has also raised concerns that the government's extensive role in the economy is only getting larger. Unlike in many other branches, the share of state ownership has been small in the Russian retail sector.