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Russia's Magnit fully completes $507 million buyback of blocked shares

By Alexander Marrow

(Reuters) - Russian retailer Magnit said on Thursday it had fully completed a deal to buy back blocked shares from Western investors at a 50% discount by purchasing shares held through Euroclear, the first such arrangement since Russia's February 2022 invasion of Ukraine.

The offer represented the first opportunity for non-resident shareholders of a Russian public company to dispose of their shareholdings with settlement in different currencies since sweeping Western sanctions over Moscow's invasion of Ukraine and subsequent Russian countermeasures restricted the flow of capital.

A source with knowledge of the deal told Reuters that 100% of the transactions had been conducted in foreign currency, with no investors seeking roubles.

Magnit said it had bought back 21,903,163.8 shares from shareholders, representing about 21.5% of all issued and outstanding shares at an amount of around 48.5 billion roubles ($507.32 million).

"In total, settlement occurred with 189 sellers from 21 countries, including Italy, the Nordic countries, Singapore, Japan, Canada, Australia, the United States, the United Kingdom, Germany and other jurisdictions," Magnit said in a statement.

Through its wholly owned subsidiary Magnit Alyans, Magnit in August completed the acquisition of shares held in Russian payment infrastructure, but was still waiting for the purchase of shares held through Euroclear Bank to go through.

ADDITIONAL SHARES

Magnit, Russia's second-largest retailer with almost 28,000 food and home goods stores across Russia and Uzbekistan, said the approvals it had received grant the right to buy additional shares from non-resident shareholders.

The company may consider "various options" for the purchase of shares from shareholders who didn't participate in the tender offer, including a new tender offer and/or bilateral sale transactions at tender offer purchase price of 2,215 roubles per share, Magnit said in a statement.

Magnit's Moscow-listed shares were trading at around 5,760 per piece on Thursday. The 50% discount is a requirement demanded by the Kremlin that Washington has dubbed an "exit tax".

JPMorgan, in an investor circular dated July 12, said "it was actively seeking to recover" shares in Magnit, which underpinned depositary receipts (DRs) JPM had issued to investors before Russia's invasion of Ukraine.

"Magnit's GDR program depositary bank, JP Morgan Chase Bank, also took part, as well as international investors," Magnit said, such as hedge funds, sovereign wealth funds and individuals.

Magnit had tripled the size of its original offer after strong demand from Western investors. Russia's presidential office is currently reviewing a request from oil major Lukoil to buy back up to 25% of its shares from foreign investors.

($1 = 95.6000 roubles)

(Reporting by Alexander Marrow; Editing by Gareth Jones)