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St. Petersburg, Russia; 20 October 2015–Lenta Ltd (LSE: LNTA / LNTR, MOEX: LNTA); "Lenta" or the "Company"), one of the largest retail chains in Russia, is pleased to announce the launch of a capital increase via an accelerated book build placement (the "Placing") of global depositary receipts ("GDRs") representing newly issued shares in the Company raising approximately $150 million to further support the acceleration of its new store expansion programme.

Additionally, the European Bank for Reconstruction and Development (“EBRD”) has informed the Company that it is planning to monetize a portion of their shareholding by selling $100 million worth of GDRs as part of this capital market transaction, with an option to increase this sale to $150m.

Rationale for the Placing

Lenta’s first half of 2015 financial results, and its third quarter trading results, have confirmed that even in the current challenging economic environment Lenta’s low price / low cost business model and distinctive price-led customer proposition continues to deliver rapid sales growth and robust returns on investment in both new and like-for-like stores

Following Lenta’s capital increase in March 2015, the Placing is commensurate with Lenta’s overall strategy for long-term growth combined with strong investment returns and a well-funded balance sheet, enabling Lenta to further accelerate its organic growth and capitalize on the opportunities afforded by current market conditions to further step up its store expansion plans

Lenta believes that the current economic conditions are conducive to further accelerating its organic growth, in part as real estate prices have become more attractive and some competitors have curtailed their growth plans

Lenta has proven its ability to deliver rapid expansion and continuously exceed its store opening targets, having opened 45 hypermarkets since the beginning of 2014. The Company has already upgraded its hypermarket opening guidance for 2015 to 30 stores, its second positive guidance update for 2015 following the successful placing of primary capital in March

The Company’s dedicated development teams have continued to make substantial progress building up Lenta's land bank and new store pipeline for 2016 and beyond. Lenta currently owns 30 land plots and is party to 20 rental and co-investment arrangements to support the new store pipeline

While Lenta has substantial undrawn debt facilities available and rating agencies have recently re-affirmed the Company’s strong financial position (upgrades to ‘BB-‘ with a “Stable” outlook from S&P’s and to “Ba3” with a “Stable” outlook from Moody’s; “BB-“ by Fitch Ratings), the enhanced financial flexibility afforded by the Placing enables Lenta to further accelerate the pace of its organic growth and raise its store opening targets for 2016 and beyond

The projected net proceeds from the Placing are equivalent to 0.4x adjusted H1 LTM EBITDA at current exchange rates and will enable Lenta to continue to maintain its leverage level comfortably below 3.0x with significantly higher levels of capital expenditure

While Lenta’ s primary growth strategy is focused on organic growth, the financial flexibility created by the Placing also enhances Lenta capacity to pursue opportunities to acquire existing stores from competitors should attractive opportunities arise

The accelerated bookbuilding process will be launched immediately following this announcement.

Credit Suisse Securities (Europe) Limited, J.P. Morgan Securities plc and VTB Capital plc are acting as Joint Global Coordinators and Joint Bookrunners in connection with the Placing. The timing of the closing of the process, pricing and allocations are at the discretion of the Company and the Joint Global Coordinators.

Lock-ups

There will be a lock-up period of 90 days for the Company, Luna Inc. (the investment vehicle of TPG) and the EBRD in relation to their respective shareholdings in the Company following the Placing.

Updated guidance

Conditional upon successful completion of the Placing and the additional financial flexibility afforded by the capital increase, Lenta will be positioned to increase certain of its previously announced growth targets and therefore to update its 2016 guidance as follows:

Lenta to open at least 40 new hypermarkets in 2016 versus previous guidance of at least 32, significantly more hypermarkets than it has ever opened in a single calendar year

Sufficient additional specific opportunities for own-store construction in 2016 have been identified, accordingly this increase in 2016 guidance is based solely on expected organic growth

Looking ahead, Lenta expects to pursue a similar or higher rate of organic growth of new hypermarket openings in 2017 and beyond.

Lenta has previously updated its guidance for 2015 which is not contingent on the Placing. For 2015, Lenta has increased its store opening guidance for 2015 to at least 30 hypermarkets and 10-15 supermarkets (unchanged from previous supermarkets guidance). The previously communicated sales growth and capital expenditure guidance for 2015 remain unchanged.

Lenta expects that as a result of the further acceleration of growth enabled by the capital increase, the Company will significantly exceed its previously communicated goal of doubling selling space over the three years to December 2016.

Lenta’s Chief Executive Officer, Jan Dunning said:

“Lenta has continued to make strong progress over the last year and is well on track to open at least 30 hypermarkets in 2015, leveraging our low price / low cost business model and our strong track record to capitalize on growth opportunities in the Russian market today. Returns on investment in our new stores have remained consistently strong and we see ample opportunities to accelerate our growth even further in the current climate.

The proceeds of the capital increase will provide us with further financial flexibility to accelerate our store opening programme to at least 40 hypermarkets in 2016 and similar or higher numbers of hyper market openings in 2017 and beyond.

With this further acceleration of our new store openings, we expect to significantly exceed our target of doubling net selling space over the three years to December 2016.”

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For further information, please visit www.lentainvestor.com, or contact:

Lenta
Anna Meleshina,
Public Relations & Government Affairs Director
Tel: +7 812 363 28 53
E-mail: anna.meleshina@lenta.com

Yana Mogileva, PR Manager
Òel: +7 (812) 336 39 97
E-mail: yana.mogileva@lenta.com

Instinctif Partners
International Media:
Mark Walter and Saule Jandossova
Òel: +44 (0)20 7457 2020
E-mail: Mark.Walter@instinctif.com

Primum
Russian Media:
Alexandra Semenova and Nikolay Konchurkov
Òel: +7 926 903 9975
E-mail: NKochurkov@primum.ru