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Russia’s largest toy seller preps $430 million IPO in latest test for the embattled economy

Russia's largest specialized children's goods retailer, Detsky Mir, has set a price range for its upcoming initial public offering (IPO) at 85 to 105 rubles ($1.41—$1.74) per share.

On Thursday, Detsky Mir stated that the selling shareholders were expected to sell a total of up to 247.9 million shares, which — in light of the announced price range — would represent an offering size between 21.1 billion to 26 billion rubles ($349.1 million—$430.3 million), giving the retailer a value of between 62.8 billion to 77.6 billion rubles.


A Detsky Mir store
Courtesy of Detsky Mir
A Detsky Mir store

According to Reuters, this IPO would be the first by a Russian retailer since hypermarket chain Lenta sold shares in London, back in 2014. As of the end of 2016, the retailer Detsky Mir had 525 stores, 468 of which were based in Russia.

Goldman Sachs International, Morgan Stanley and Credit Suisse are expected to act as joint global coordinators and joint book-runners. After the offering, the free float for Detsky Mir is expected to be around 33.55 percent. The announcement comes after the brand announced its intention to float on the Moscow Exchange just 10 days ago.

Following the initial IPO news, the chief executive of Sistema — which currently maintains majority ownership — told CNBC at the World Economic Forum last week the company was undertaking the IPO for practical purposes and had to "create value and monetize (their) assets."

"We started developing Detsky Mir about four years ago and at that point the value of that business I should say was around five to 10 billion rubles maybe," Mikhail Shamolin, president and CEO of Sistema, told CNBC at Davos.

"And we clearly succeeded in building a large business out of it and its value today exceeds that of three years ago, probably ten-fold even more."

In a statement released by Detsky Mir on Thursday, the toy seller's CEO, Vladimir Chirakhov, echoed Shamolin's comments on the company's growth, stating that the brand expected full-year revenue for 2016 to rise by some 30 percent year-on-year.

In addition, the firm said like-for-like sales growth at its Russian stores was expected to come in at 10.8 percent, while online sales had almost doubled year-on-year.

Shamolin went on to add that the company felt it was an "opportune time" to IPO and that Sistema was planning to remain in a controlling stake for the foreseeable future, adding that it was a "right time to monetize and bring some of the money back."

"It's very important to demonstrate success and make this company public, so we can kind of open up this valuation and make it practical from theoretical."

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