German consumer electronics group Ceconomy, which split off from wholesaler Metro AG last year, is expected to strike a deal within days to sell its loss-making Russian business to Safmar and take a 15% stake in Safmar's M.video, three people close to the matter said.
The group, which owns retail chain Media-Saturn, is considering a capital increase to finance the transaction and bolster its balance sheet, the people said.
One of them said it was mulling a capital hike of roughly 10 percent, which would raise around 280 million euros at the company's current market value.
Ceconomy had no immediate comment.
Separate Ways
Ceconomy emerged last year from a split from Metro, which is now a food-focused retailer. Ceconomy retains a 10 percent stake in Metro, which has lost a third of its value this year as its Russia business has weighed on earnings.
The Kellerhals family, which holds a minority stake in Media-Saturn and has been at odds with the management of Ceconomy and Metro, has so far refused to sign off on profit transfers from Media-Saturn to Ceconomy, which has limited its access to cash to pay for the Russia deal.
Russia's top two electrical goods and home appliances retailers - M.video and Eldorado - are preparing to merge, and Ceconomy said in January it was seeking a "strategic answer" to its poorly performing Russian business by the end of 2018.
If a deal is concluded, Media-Saturn would pay about €258 million for the M.Video stake based on current exchange rates, although that could be cut depending on financial performance, Ceconomy had said in a statement earlier this month.
One-Time Hit
It had said that the transaction would entirely eliminate the operational losses of Media-Saturn's Russian business, but have a one-time hit to Ceconomy's net profit for the 2017/18 financial year of more than 100 million euros.
In April, Reuters was first to report that Media-Saturn was in talks with M.video about disposing of its Russian business.
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