Etalon Group to Consolidate 100% of Leader-Invest

30 July 2019

The Board of Directors of ETALON GROUP PLC (“Etalon Group” or the “Company”), one of Russia’s largest and longest-established development and construction companies, has unanimously supported a proposal to purchase the remaining 49% of Leader-Invest JSC (“Leader-Invest”) shares from Sistema PJSFC (“Sistema”) (LSE: SSA, MOEX: AFKS), a publicly traded diversified Russian holding company, for RUB 14.6 billion (the "Transaction"). This decision aims to optimise Etalon Group’s asset ownership structure and to maximise synergies from the acquisition of Leader-Invest.

Etalon Group already holds a 51% stake in Leader-Invest, which it acquired in February 2019 for RUB 15.2 billion. Completion of this Transaction will bring the Company's ownership of Leader-Invest shares to 100%. Russia’s Federal Antimonopoly Service has already granted its approval for the Transaction. Etalon Group plans to close the Transaction in August 2019 with financing from a long-term credit line.

In accordance with the best practices in corporate governance, as well as the Relationship Agreement signed between Etalon Group and Sistema, Sistema representatives on the Etalon Group Board of Directors did not participate in the voting regarding this Transaction. The unanimous decision to proceed with the purchase was made by the remaining members of the Board of Directors, including the six Independent Directors.

The Acquisition

Leader-Invest is one of the largest players on Moscow’s residential development market in terms of landbank and number of available-for-sale projects. It is primarily focused on infill development and large scale integrated urban development projects in the comfort, business and premium class segments. 

Leader-Invest’s project portfolio, including the recently consolidated ZIL-Yug project, consists of 31 projects currently at the construction and design stages, as well as unsold residential real estate at eight completed residential complexes and commercial real estate, with a total NSA of 1.9 million sqm. As of 31 December 2018, Leader-Invest’s project portfolio including the acquisition of LSR’s stake in the ZIL-Yug project was valued at RUB 86,266 million, according to Knight Frank.

Etalon Group Chief Executive Officer Gennadiy Shcherbina said:

“Leader-Invest delivered impressive growth in its 2Q 2019 operational results thanks to the successful completion of nearly all integration processes. These strong results, combined with Etalon Group’s solid cash position, meant that we were able to propose the buyout of the remaining 49% of Leader-Invest to the Board of Directors, which unanimously supported the Transaction.

“Obtaining full control of Leader-Invest will allow the Company to complete the remaining stages of the integration process in short order, to rebrand Leader-Invest projects under a unified Etalon Group banner, and to streamline the organisational and legal structure of our Moscow business. As a result, we will maximise the synergies generated from the acquisition of this asset.

“Thanks to the buyout of the remaining stake in Leader-Invest and the consolidation of 100% of the ZIL-Yug project, Etalon Group has gained access to a project portfolio worth RUB 86 billion, and has become a market leader in the Russian capital with a firm position among the top three real estate developers across all metrics.

“Given Etalon Group’s many years of experience and our Company’s unique skillset, this transaction will not only give us the opportunity to strengthen our leadership position, but will also create a firm foundation for further strengthening the Company’s operational and financial results. It will also support attractive returns on investment for Etalon Group shareholders over the long term, as we are able to realise the full potential of Leader-Invest’s project portfolio.”

This and other recent announcements are available on the Etalon Group website: https://www.etalongroup.com/investor-relations/investor-news/

Etalon Group IR Team

T: +44 20 8123 1328
E: info@etalongroup.com

EM

Sam VanDerlip
T: +44 7554 993 032
T: +7 499 918 3134
E: vanderlip@em-comms.com

About Etalon Group

Founded in 1987, Etalon Group has become one of Russia's largest development and construction corporations. The Company focuses on middle class residential real estate in the Moscow and St Petersburg metropolitan areas, where it operates through its Etalon Invest and Etalon LenSpetsSMU subsidiaries. With a more than 30-year history, Etalon Group has one of the longest and most successful track records in the Russian real estate industry; since its inception, Etalon Group has commissioned 6.3 million sqm.

Etalon Group's traditionally conservative approach managing its financial position, solid cash generation and strict working capital management have enabled the company to maintain a secure liquidity position: net cash as of 31 December 2018 was RUB 2.2 billion.

The Company is vertically integrated, which helps it to control costs, quality and timing, as well as to demonstrate best-in-class profitability. Etalon Group employs over 5,000 people, and its nationwide sales and marketing network covers 58 Russian cities.

In February 2019 Etalon Group acquired 51% of the shares of Leader-Invest, one of Moscow’s largest residential developers in terms of land bank and number of projects currently available for sale.

As of 31 December 2018, Etalon Group's assets comprised 76 projects, including 40 Leader-Invest projects and a construction and maintenance division, with a total of 3.4 million sqm of unsold net sellable area. Knight Frank valued the Company’s total assets under management at RUB 186,908 million.

For the year ended 31 December 2018, Etalon Group's new contract sales totalled 628 ths sqm, or RUB 68,731 million. Deliveries in 2018 amounted to 479 ths sqm.

The Company recorded revenue of RUB 72.3 billion and EBITDA of RUB 5.7 billion for the year ended 31 December 2018.

Etalon Group’s GDRs have been traded on the Main Market of the London Stock Exchange since 20 April 2011.