French group Adeo, owner of the Leroy Merlin construction chain, said it would hand over its Russian business to local government. This is specified expression on the group’s website.
“After more than 18 years of operation in Russia, transferring control of Leroy Merlin to local government should create jobs for 45,000 employees and ensure that the company’s operations continue to work for the benefit of the people,” the message says.
Adeo announced that it has been working on the transition of Leroy Merlin stores to the control of the Russian leadership for several months. And this is a continuation of processes in which the group suspended all investments in Russia after the announcement of Western sanctions in 2022.
In the statement, it was stated that the agreement will be made with the approval of the Russian supervisory authorities and Adeo will act on the basis of responsibility towards its employees.
A representative of the French holding, in an interview with RBC, emphasized that the transition to local government will not affect the activities of the construction chain of hypermarkets and all employees will keep their jobs.
The Leroy Merlin network in Russia has 111 stores in 65 cities. It is among the top 10 retailers in the country according to InfoLine-Analytics. In 2022, the revenue of the network reached about 530 billion rubles, which is 15% higher than in the previous year.
In March 2022, French authorities advised their companies not to rush to leave the Russian market despite the announced sanctions. Noting that companies should determine their own strategies, Bruno Le Maire, the French Minister of Economy and Finance, emphasized that “in times of crisis, it seems more logical to suspend their activities rather than leaving the country hastily, unilaterally and without warning.”
After that, Leroy Merlin announced that it will continue to work in the Russian market. In January 2023, Adeo reported that it had halted all investments in its business in Russia, following the instructions of international restrictions, following the start of a special operation in Ukraine.
Over the past year, information has repeatedly emerged that another French chain, Auchan, may close its stores in Russia. The media first reported this in March 2022. However, representatives of the grocery hypermarket chain later denied these rumors, calling them “an attempt to destabilize the situation.”
The company’s managing director, Yves Claude, said that they will continue to operate in the Russian market, despite criticism from Ukrainian officials and calls to suspend operations. Claude called the main reason for maintaining his positions in Russia, the desire to retain personnel, and the fulfillment of his main task – to “feed the population” of the country.
In January 2023, French sports department chain Decathlon announced its final withdrawal from Russia. It suspended the supply of the product last year and subsequently closed all stores.
At the same time, Auchan, Decathlon and Leroy Merlin actually belong to the same owner – the AFM holding company, which is controlled by the Mullier clan, one of the wealthiest families in France.
In most major Russian cities, Auchan and Leroy Merlin lease retail space from IKEA and the Swedish Ingka Group, owner of the Mega mall chain. IKEA has closed all its stores since last year. In February 2023, citing sources, RBC and Kommersant reported that Ingka Group plans to sell all its real estate in Russia and is now looking for buyers for these assets.
Ingka Group is the largest commercial real estate owner in the country, with approximately 2 million square meters. It is m. in shopping malls and it is 2 million m2. m of rental area. Experts estimate these assets to be $5 billion in a normal market situation. But taking into account the departure of many companies from Russia, the discount in the Swedish holding area can be at least 50%, and the payment will be made in installments.
Source: Gazeta
Ben Stock is a business analyst and writer for “Social Bites”. He offers insightful articles on the latest business news and developments, providing readers with a comprehensive understanding of the business world.