Sber said to be in talks with Merlion on major e-commerce acquisition

16 January 2021

Sber, Russia’s state-controlled financial and tech giant (previously known as Sberbank), is considering the acquisition of alongside some other assets of the Merlion group. The discussions were reported by business daily Kommersant but not confirmed by the parties.

Selling electronic appliances and a variety of other products, Citilink is among the top Russian e-commerce sites. It was number two in 2019 — behind Wildberries but ahead of Ozon — with $1.4 billion generated in sales revenues, according to Data Insight’s ranking.

In the case of a deal, Citilink could be valued at around $1 billion, reports Kommersant.

The other assets concerned by the potential deal are (#67 e-commerce site in 2019 with $48 million in sales) and computer repair company Computer Clinic Network.

Kommersant cited experts who say the deal would allow Merlion to keep its core IT distribution business afloat. However, other types of considerations could be involved. In November last year, three Merlion co-owners — Alexey Abramov, Oleg Karchev and Vladislav Mangutov — were arrested along with Boris Levin, a top manager of the company, reported the business daily. The businessmen are accused of being involved in a murder in Moscow back in 2015.

Thus, the Merlion owners could regard a deal with Sber as a way of protecting their assets, believes a market insider interviewed by Kommersant.

Unsuccessful previous attempts

On the Sber side, the motives are straightforward: the group aims to to establish a solid position on the Russian e-commerce scene — a missing element in the tentacular digital ecosystem it has been building for the past years.

In November Sber strongly reaffirmed its ambitions in the e-commerce space, following several previous unsuccessful attempts to partner with industry leaders:

  • In 2017, the company agreed with Yandex a JV plan to create a “leading e-commerce ecosystem” in Russia. Sber put $500 million in the project, which led to the launch of two marketplaces: ‘Bringly’ for cross-border e-commerce and ‘Beru’ for domestic operations. While the previous shut down one year after the launch, the latter fell under the control of Yandex as the two companies put an end to their alliance in mid-2020.
  • Earlier this year Sber prepared to buy a large stake in Ozon, Russia’s first multi category e-commerce platform — but the talks stalled, Sberbank demanded and obtained a 1 billion ruble ($12.9 million) compensation for terminating the agreement, and Ozon finally found the money it needed on the NASDAQ.
  • More recently Sber had discussions with M.Video, a leading consumer electronic retail chain — a competitor of Citilink — regarding a potential involvement in its marketplace Such a partnership, however, would have been insufficient: in spite of its fast growth, remains a relatively small player on the Russian e-commerce scene. In 2019 this marketplace ranked only 26th among Russian e-commerce sites, according to Data Insight. In addition, note industry analysts, is tightly integrated with M.VIdeo’s retail business, which could complicate its interconnection with Sber’s own ecosystem.

Sberbank made a huge way over the past decade from national savings bank to digital giant. Its large ecosystem — which it implicitly compares with Amazon and Apple — includes first-rank players in driving services (through O2O and 2GIS), media and entertainment (through the acquisitions of Rambler, Okko and Zvooq), online pharmacy (Eapteka), and some other sectors.

Whether the group will finally succeed in establishing a firm foothold in e-commerce will be among the most interesting intrigues of the coming years in the Russian digital space.

Data Insight expected online sales of physical goods in Russia to reach 2.5 trillion rubles in 2020 ($34 billion at the average exchange rate) and potentially some 7 trillion rubles (nearly $90 billion) by 2024.

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