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Business / Finance

Forbes Russia: Total demagnetization: why Sergey Galitsky has sold "Magnet"

Banki.ru: monitoring of the banking press 29.12.2018 at 10:00

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The founding Father of one of the largest Russian retailers — "salesman of the year" according to Forbes.

16 Feb 2018 at the main office of "Magnit" in Krasnodar played out a little drama as hundreds of employees of the company spontaneously poured into the streets to say goodbye to her father. A few hours before at the investment forum in Sochi Sergey Galitsky announced that it has sold almost its entire stake in Magnit VTB Bank. Standing in front of his, now former, co-workers, he tried to reassure them: "no One died. Life goes on. Just I'm a grown man — a psychological load to bear very hard, day to day, from day to day." Staff it is with regret and gratitude chanted "Spa-si-Bo! Spa-si-Bo!" Galitskiy, who opened the first store in 1998 in 2018 has provided jobs for 270 000 people, and its nationwide network has grown to almost 17 000 stores. Sold to VTB, with 29.1% of shares of "Magnet", its founder has received 138 billion rubles, he kept a minority stake of 2.7 per cent of the shares in December 2018, he was worth about 10 billion rubles. Sergey Galitsky could get much more if, as found by Forbes, a year earlier managed to negotiate the sale of the business with another billionaire, the owner "Severstal" Alexey Mordashov.

Without a Navigator and captain

Three years, 2013-2016, created from scratch the provincial "Magnet" was the leader of the market by revenue, seven years, 2010-2018, is by market capitalization. He became a legend of Russian retail sector. However, in the last two years from the company came more bad news.

the Eleventh of January 2016 the position of General Director of JSC "Tander", the operating company of "Magnet", left Vladimir gordeychuk, the longtime partner Sergey Galitsky. Gordeychuk started working for Galician in 1996, when he was selling products by Procter & Gamble, former Navigator of long voyage came to the company with a simple driver and rose to CEO and co-owner of "Magnet" (he owned more than 2% of the company).

"Magnet" created by two people — Halych and gordeychuk, says one of the former top managers of the company. The first stood above the fray and gave impetus to change, and the second was the car that set in motion the whole mechanism". Familiar with Galician financier argues that gordeychuk many years has been the informal CEO of "Magnit". Why did he leave? The interlocutors Forbes consider, that between long-time partners lost personal contact. "Gordeychuk has ceased to find support among the Galician," says a former top Manager. Galitsky declined to comment for this article.

the Dismissal of Vladimir Gordeychuk was not on level ground. The leader of the food retail sector began a black stripe. Behind Magnit X5 in 2010, the Krasnodar company has bypassed on capitalisation ($9.6 billion versus $9.4 billion), and after three years and the revenue became transformed. The owners of "Alfa-Group" were able to stop reshuffle in the leadership of X5, a member of the network "Pyaterochka" worked out the technology of rapid reconstruction of stores and accelerated their growth and 19% increased its revenue at the end of 2014.

In 2014, the turnover and net profit of "Magnet" was still higher than that of X5 (764 billion roubles, as compared to 634 billion and 48 billion rubles to 13 billion respectively), but it became clear that the main competitor comes on the heels of. However, at this moment Galitsky decided he could take a break. In 2015, he said that "the team could easily grow this business" without him and Gordeychuk. "Sergei was the face of the company when it was about the investors, but the time spent in the office each year was declining rapidly," says his friend. More attention Galitsky began to give his football club "Krasnodar".

After the departure of the Galician Gordeychuk was appointed CEO of the "thunder" Deputy sales Alexander Barsukov, but he worked in the office less than a year. Then began a collective leadership. In fact, the company operated three managers: chief financial officer Khachatur Pombukhchan, Deputy Director General for logistics and staff "thunder" Ilya Sattarov and brother Galitsky, Deputy General Director of "thunder" for the development Andrey Arutyunyan. A trilateral power only worsened the situation in the company, business is not developed. "Pombuhchan and Sattarov took a strange decision, says person familiar with the situation in the market financier, and tried to prove each other who is cooler". Unattended, for example, was a system of centralized ADR goods, which gives the user the ability to quickly see management reports to improve accessibility of goods and accelerate inventory turnover. These capabilities were transferred to a lower level — in marketing.

In 2016, the company decreased such important indicators as the average check and gross margin. In the "Magnet" is explained by "the weak macroeconomic situation" as well as "transition buyers for less expensive goods." And X5, meanwhile, continued to gather momentum in 2016 have demonstrated the highest since 2011, revenue growth came close on this indicator to the leader. X5 revenue for the year amounted to 1,026 trillion rubles, "Magnet" — 1,075 trillion rubles. "Chee lost the manual that went on for some time, and received in the management company the managers were very pensive," — said a senior analyst of Gazprombank Marat Ibragimov. In 2017 Ibragimov on one of the days of the investor approached the top Manager of "Magnet" with the question, why not use the experience of the X5, which has decentralized many operations and thus made opening new outlets more efficient. "He said that the X5 is not an example for them," — says the analyst.

tension

In the first quarter of 2017 walked X5 "Magnet" for revenue, and, recalls a former top Manager of the company, in the spring of Galitsky came out: "Football and everything else faded into the background, he walked to work all Saturday and Sunday". However, the market situation has changed. "If we had been the undisputed industry leader and ran ahead of all, now began catching up," — says the interlocutor of Forbes.

20 Oct 2017 after reporting a "Magnet" for the III quarter of the state Sergey Galitsky was down $606 million, to $6.1 billion, Investors were disappointed: the company's profit was lower by 53.3 per cent over the same period of the previous year. By the end of 2017, the profit of "Magnet" has decreased on 40%, the capitalization for the year fell from 1.1 trillion roubles to 646 billion.

Sergey Galitsky realized that is unlikely to be able to cope with the situation alone. Back in the spring of 2017 he began negotiations for the sale of "Magnet" with the owner "Severstal" Alexey Mordashov. In "Severstal" have confirmed to Forbes the fact of these negotiations. Mordashov have been a long-standing interest in retail, its own structure online-hypermarket "Utkonos" with revenue of more than 8 billion rubles. The fusion of online trading with the retail chain "Magnet" could theoretically produce a synergistic effect. However, the negotiations "were not completed because the requested price was too high," explains an acquaintance of Mordashov. Galitsky was afraid to sell too cheap, but eventually sold his stake in two times cheaper than they could. At the end of may 2017, the share of "Magnet" worth 9127 rubles, during the transaction with VTB to 2018 — 4473 ruble.

By the end of 2017 Galitsky was ready and to attract managers from outside, he began negotiations with the General Director of Pyaterochka Olga Naumova and chief Executive officer of a trading network "the Tape" Jan Cunningham. Naumov has successfully reorganized its main competitor Magnit, Dunning was a great experience for the development of hypermarkets. The transition Naumova in "the Magnet" has taken place only in the summer of 2018, under the new owner.

"In January 2018 Galician VTB asked him to find a buyer, and the Bank decided to purchase a "Magnet" for yourself" — says a friend of the founder "the Magnet". The transaction is carried out very quickly, confirmed by the former top Manager of the company. According to him, Galician "painfully perceived failures and blamed themselves; sales, he decided under a high nervous tension".

Most of the proceeds for his money he invested in the investment Fund managed by the established in June 2018, the company "SN Capital". "The Fund is an alternative to Deposit all the money from the "Magnet" will go to social and charitable projects, — tells a familiar with Galician financier. — He wants to turn the city of Krasnodar to the European level". A former top Manager of "Magnet" says the founder of a network still recovering after stress and is looking for emotional balance: "Galician while just resting."

Alexander LEVINSKY, Forbes Staff