REG - Etalon Group PLC - Etalon to Acquire YIT’s Russian Business

EtalonAnnouncement

01/04/2022 07:00

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RNS Number : 8812G  Etalon Group PLC  01 April 2022

1 April 2022

 

Etalon to Acquire YIT's Russian Business

 

ETALON GROUP PLC ("Etalon Group" or the "Company"), one of Russia's largest
and longest-established development and construction companies, announces that
its Board of Directors has reviewed and approved the strategic acquisition of
YIT Corporation's ("YIT") Russian business ("YIT Russia") for a maximum
consideration of RUB 4,597 million (the "Transaction").

 

Etalon Group together with YIT Corporation have agreed on the sale of YIT
Russia. The completion of the Transaction is subject to further regulatory
approvals.

 

Etalon Group engaged KPMG to carry out legal, financial and tax due diligence
and to act as a consultant.

 

Acquired asset

 

According to the agreement, Etalon Group will acquire YIT Russia, which
focuses on mid-market residential real estate; its portfolio includes 19
projects in five different Russian regions: the Moscow metropolitan area, St
Petersburg, the Ekaterinburg region, Kazan and Tyumen. YIT Russia's portfolio
consists of residential real estate at the design stage or under construction.
YIT's portfolio in Russia has a total unsold net sellable area (NSA) of 0.6
mln sqm.

 

In addition, the Transaction will include exclusive rights to Dispatcher 24
software for managing apartment buildings and residential areas, project
design documentation and a library of standard design solutions for
cast-in-place construction and buildings made of prefabricated panels, as well
as service companies with 2.5 mln sqm under management and a 50% stake in a
joint venture with Brusnika, whose assets under management total 2.2 mln sqm.

 

Dispatcher 24 is Russia's largest private IT platform for B2C housing and
utility services; it is used by over 180 service companies in 28 Russian
cities, with a total of c. 37 mln sqm of residential space under management.
Since 2018, Dispatcher 24's subscriber base has increased by an average annual
rate of 19%.

 

In addition, YIT Russia has developed its own design management function based
on product standardisation, automation, innovation and a hands-on approach to
design management at every level. Thanks to its design business, YIT Russia
was the first to introduce a number of advanced design solutions in the
Russian market, such as transformable apartments, storage spaces and walk-in
closets.

 

As of 31 March 2022, based on management accounts, YIT Russia had a net
corporate cash position of RUB 5.3 billion and net project cash of RUB 8.4
billion.

YIT Russia's history

YIT Russia started its operations in 1961 with the development of various
industrial projects. In 1997, YIT Russia began to focus on residential housing
development with the purchase of a St Petersburg-based construction company.
From 2005 to 2016, YIT Russia expanded its operations in five Russian regions.
In 2016, YIT Russia spun its service businesses off into a stand-alone
business and later invested in the start-up Dispatcher 24.

Currently, YIT Russia is one of the leading housing construction companies in
Russia, with a reputation for providing high-quality construction and
services. YIT Russia has delivered 56 residential complexes since the
inception of its business in Russia.

Commenting on the transaction, Etalon Group CEO Gennadiy Shcherbina said:

"YIT is a long-established name in the Russian market, with a strong
reputation for delivering high-quality residential real estate. Its
geographical focus and expertise in the mid-market segment represent a strong
strategic fit with Etalon Group's plans to bolster its land bank in in St
Petersburg, Moscow and other regions in 2022.

"The integration of YIT's business in Russia will enable Etalon Group to
achieve several important goals, such as increasing the scale of the Company's
operations and strengthening our market position. Thanks to YIT's solid track
record in regional markets, good reputation and experienced teams responsible
for construction and sales, we can speed up our regional expansion by
accelerating the pace of construction activities on our own projects in
Ekaterinburg and Tyumen as well as by adding attractive new projects. The
acquisition of YIT Russia will also enable us to enter Kazan, one of the
country's most promising markets, thus expanding our geography of operations
to seven regions. It will also increase our supply in our primary markets of
Moscow and St Petersburg.

"In addition, we see enormous potential from the acquisition for continuing
the technological transformation of our business and becoming a leading player
in terms of technological know-how. The combination of YIT Russia's and Etalon
Group's design-related solutions and know-how will enable us to speed up our
standardisation efforts and to create the best product in the market.
Moreover, with access to the Dispatcher 24 platform, we can become a leading
Russian provider of additional services for residents of housing complexes,
and the integration of the Dispatcher 24 platform with our own digital
platform will enable us to receive seamless feedback that we can use to
improve our product even more.

"I believe that YIT's project portfolio, service management company and
technologies are solid additions to Etalon Group's current operations and that
this transaction will enable us to achieve strong operational synergies."

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

 

Contact information

 

Etalon Group

IR Team

T: +44 (0) 20 8123 1328

E: ir@etalongroup.com

EM

E: etalon@em-comms.com (mailto:etalon@em-comms.com)

About Etalon Group

Founded in 1987, Etalon Group is one of the largest development and
construction companies in Russia. The Company focuses on middle class
residential real estate in the Moscow and St Petersburg metropolitan areas. In
2021, the Company began a regional expansion programme and has already
launched new projects in Omsk, the Novosibirsk region as well as Ekaterinburg
and Tyumen. With a 35-year history, Etalon Group has one of the longest and
most successful track records in the Russian real estate industry. Since its
foundation, Etalon Group has commissioned 7.9 million sqm of real estate.

Thanks to its integrated business model, Etalon Group is able to create added
value for customers and shareholders at every stage of development, from land
plot analysis and acquisition to the operation and maintenance of existing
properties. Etalon Group employs over 4,600 people, and its nationwide sales
and marketing network covers 59 Russian cities.

Etalon Group's total assets comprise 27 projects under development, unsold
inventory at completed residential complexes and commercial properties, with
total unsold NSA of 6.0 million sqm, as well as a construction and maintenance
division. Colliers International valued the Company's total assets at RUB 270
billion as of 31 December 2021.

In 2021, Etalon Group's new contract sales totalled 446 ths sqm, or RUB 84.4
billion. The Company's revenue in 2020 amounted to RUB 78.7 billion, with
EBITDA of RUB 12.6 billion.

Etalon Group's GDRs have traded on the Main Market of the London Stock
Exchange since 20 April 2011 and on the Level 1 quotation list of Moscow
Exchange since 31 January 2020 under the ticker ETLN.

 

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