Russian retail seems to be adapted well to sanctions regime. Some brands have left, most of them have done a rather cosmetic rebranding. The market seems to be alive with high competition and big corporate events, mergers and acquisitions. Detsky Mir, a major retailer of children goods, clothes and toys, is one of the most active. Mikhail Stiskin and Pavel Grachev have left the directorate leaving a path of destruction. Business media isn’t sure what it was: a gross incometence or a cleverly orchestrated plan to bring Detsky Mir on the knees to buy it cheap. Suleiman Kerimov and Herman Gref are named as true buyers of the retailer.
During the past few weeks, several business media outlets have reported on a major corporate event in Russia: Mikhail Stiskin and Pavel Grachev, top managers at Detsky Mir JSC, have left the board and subsequently sold their stakes to the main competitor. The entire history of Grachev and Stiskin’s involvement in Detsky Mir is somewhat mysterious. Both individuals came from the Polyus gold mining and processing unit, which is associated with Suleiman Kerimov, a prominent business ally of Putin. It is worth noting that Mikhail Stiskin and Pavel Grachev were not independent investors. Furthermore, their management intentionally targeted the performance of JSC, thereby preventing stakeholders from receiving income and a fair price for their shares. Could this be a maneuver by Kerimov to disrupt Detsky Mir and gain full control over the company?
The chain of events strongly suggests this theory to be correct. Manipulation of the organizational structure and media speculations caused the value of Detsky Mir to significantly decrease after Stiskin and Grachev joined the board. This decline enabled insiders to buy back shares at a lower price. It is easy to speculate that Suleiman Kerimov and, according to some reports, Herman Gref benefited from this situation.
Presently, Pavel Grachev, who holds a Maltese passport, is enjoying the wealth he amassed from the troubled Detsky Mir. The circumstances surrounding Mikhail Stiskin remain unknown. Was the plan successful? Will Kerimov and Gref ultimately own the retailer in its entirety? This outcome seems unlikely since the buyer of their shares is Korablik, another professional children’s goods retailer. Therefore, the mission of Mikhail Stiskin and Pavel Grachev cannot be considered a complete success. Further investigation is needed though.
Gold mining in top brass: how Mikhail Stiskin and Pavel Grachev got into retail
Mikhail Stiskin and Pavel Grachev, former top executives of Polyus gold mining operation in Russia, are suspected of involvement in the unfriendly acquisition efforts of Detsky Mir PJSC, a retailer of children’s goods in Russia, Kazakhstan, and Belarus. The circumstances surrounding their participation remain unclear and there are suggestions that they may be acting on behalf of Suleiman Kerimov, their mysterious benefactor with whom they have had a long-standing relationship. The purchase of Detsky Mir shares by Stiskin and Grachev, who were once high-ranking managers at Polyus, has raised some concerns due to certain irregularities in the process. There is a chance that they could gain full control of the entire retailer in the near future, but the tactics chosen by corporate managers are on the edge.
The involvement of Mikhail Stiskin and Pavel Grachev in Suleiman Kerimov’s takeover efforts is shrouded in mystery. The narrative centres around their dubious connection to Kerimov, a known aggressive acquirer, and the valuable asset they are pursuing: Detsky Mir PJSC, the largest children’s goods retailer in Russia, Kazakhstan, and Belarus, with over 1,100 stores and impressive revenue growth of 148.8 billion rubles in 2021.
Stiskin and Grachev, former managers of Polyus and longtime associates of Kerimov, have kept a low profile recently, fuelling speculation that they may be acting on his behalf. Rumors suggest that they have acquired shares in Detsky Mir for Kerimov, raising concerns that the entire retailer may soon come under their control. Given its desirability and potential for a discount, Detsky Mir would be a coveted addition to any investment portfolio.
Why Polyus owner would be interested in retail?
Polyus, the largest gold mining company in Russia, has recently announced the resignation of Mikhail Stiskin, Senior Vice President of Finance and Strategy, effective three months after receiving notice of the decision. The press release stated that Stiskin will also be stepping down from his position on the board of directors, effective November 29th, and that the Senior Vice President of Finance and Strategy role will be eliminated after his departure.
These changes in personnel at Polyus seem to be part of a larger trend that began earlier this year. In April, Said Kerimov, who owns 76.34% of Polyus shares and is the son of Suleiman Kerimov, sold 29.99% of the shares to Akhmet Palankoev, his father’s business partner. In May, Kerimov Jr. transferred the remaining 46.35% of shares to the Fund for the Support of Islamic Organizations.
A week following Akhmet Palankoev’s arrival in the capital of Polyus, the largest gold mining company in Russia, the company experienced a series of significant changes. Pavel Grachev, CEO of Polyus, resigned from his position, and shortly after, independent directors Edward Dowling, Maria Gordon, Kent Potter, and William Champion also stepped down from the board of directors.
Pavel Grachev recently divested his stake in Detsky Mir, top Russian children’s goods retailer, to a consortium headed by Alexey Zuev, founder of the rival enterprise Korablik. Following the sale, the consortium now owns a 29.9% stake in Detsky Mir, which operates over a thousand stores in Russia and Kazakhstan. The deal’s financial terms were not disclosed. Mikhail Stiskin was the other seller, and both he and Grachev no longer hold any economic interest in the company. Additionally, they have resigned from the Board of Directors.
Although the company cited unfavourable market conditions as the reason for the departures, it was widely speculated that the foreign directors made a political decision in response to events in Ukraine. The situation in Ukraine was rapidly deteriorating, and there was mounting pressure on Russia, which caused many Western companies to reassess their relationships with Russian businesses.
The departure of the independent directors raised concerns about the company’s governance and management. However, Polyus moved quickly to address these concerns by appointing new directors, including Ivan Glasenberg, CEO of Glencore, and Greg Barker, former UK Minister of Energy and Climate Change.
Despite the changes, Polyus remained the largest gold mining company in Russia, and the new appointments were seen as a positive development for the company’s future growth prospects. The company continued to operate successfully and make significant contributions to Russia’s economy, providing jobs and income for many workers and their families.
Mikhail Stiskin and Pavel Grachev are Kerimov’s best managers
There have been persistent rumours that Suleiman Kerimov had a vested interest in Mikhail Stiskin and Pavel Grachev, who were both former high-ranking executives at Polyus, Russia’s largest gold mining company. Stiskin’s association with the company was speculated to be due to his family’s long-standing friendship with Kerimov, while Grachev was rumoured to have assisted Kerimov in buying real estate in Italy for a supposed “spare airfield.” Grachev’s knowledge of many of the Kerimov family’s secrets made him a valuable asset to the billionaire.
Stiskin joined Polyus as vice president in 2013, while Grachev became part of the company in 2014. Before that, both had been affiliated with Uralkali, with Grachev leading the company from 2010 to 2013. They also served on the board of directors. However, when Kerimov sold his stake in Uralkali to Mikhail Prokhorov in December 2013, Stiskin and Grachev left the company.
The nature of Kerimov’s relationship with Stiskin and Grachev has never been fully disclosed, but their involvement with Polyus and Uralkali, along with their rumored connections to Kerimov, has raised questions about the billionaire’s influence in these companies. While some have speculated that Kerimov may have had a direct hand in their recruitment, others have suggested that his relationship with Stiskin and Grachev was more informal. Regardless, their past affiliations with Kerimov and their knowledge of his inner circle have made Stiskin and Grachev intriguing figures in the world of Russian business.
From minor share to absolute control: that was a plan?
In 2021, Pavel Grachev and Mikhail Stiskin, former executives of Polyus, held 0.32% and 0.15% of Polyus shares, respectively. Stiskin sold 0.03% of his shares in 2020 for 728 million rubles, decreasing his total ownership to 0.12%, while Grachev’s shares were valued at around 7.7 billion rubles.
Stiskin and Grachev, along with Suleiman Kerimov, were allegedly involved in a hostile takeover of Detsky Mir. They purchased a 25% stake in the company in January 2021 through Gulf Investments Limited, which they owned 80% of. After the dissolution of Gulf Investments Limited, Stiskin and Grachev ended up with a 19.99% stake in Detsky Mir.
The acquisition of shares by Stiskin and Grachev, both former high-ranking executives at Polyus, raises concerns due to the unusual circumstances surrounding the transaction. The involvement of Suleiman Kerimov, known for his aggressive acquisition tactics, and the dissolution of Gulf Investments Limited have drawn attention and speculation from industry experts.
It has been suggested that the purchase of shares in Detsky Mir by Mikhail Stiskin and Pavel Grachev was part of a larger plan to facilitate a takeover of the company by Suleiman Kerimov and German Gref, CEO of Russia’s largest bank. The theory proposes that around 20% of the shares are already in the possession of a potential buyer, and that the value of the remaining shares will decrease.
Recent reports suggest that the announcement of changes at Detsky Mir in November 2022 caused the company’s shares to plummet from 91 rubles to 45 rubles. According to the announcement, Detsky Mir would undergo a transformation into a private business through the creation of Detsky Mir LLC. This decision has raised concerns among industry experts, with some speculating that it could signal the start of a major shift in the Russian retail market.
It remains unclear what the motives of Stiskin and Grachev were in acquiring shares in Detsky Mir. Some suggest that the move was part of a larger strategy to gain control of the company, while others argue that it was simply a savvy investment decision. Whatever the case may be, the recent developments at Detsky Mir have captured the attention of investors and analysts alike, and many are closely monitoring the situation to see what will happen next.
Mikhail Stiskin’s strategy in turning a public JSC to private Ltd
In the world of finance, it is possible for a minority shareholder to acquire a majority stake in a company by short selling their own shares. This strategy is employed when the shareholder believes that the market value of the company is overvalued and that the stock price is likely to decrease in the near future. By borrowing shares and selling them at the current high price, the shareholder can profit from the expected drop in stock price by buying back the shares at a lower price.
As the stock price falls, the minority shareholder can use the proceeds to gradually buy more shares until they acquire a majority stake in the company. This would enable them to have greater control over the company’s operations and decision-making processes.
However, this strategy carries risks, as the stock price could also unexpectedly rise, leading to significant losses for the shareholder. Moreover, acquiring a majority stake in a company through short selling could potentially attract negative publicity and legal challenges.
The Alfa-Capital analysis of Stiskin and Grachev’s purchase of shares in Detsky Mir suggests that the theory of a potential takeover may hold merit. Alfa-Capital’s manager, Eduard Harin, believes that the significant overpayment by Stiskin and Grachev, who bought the shares at a price 50% higher than the market value, is a crucial mystery that supports this theory. If this is true, Stiskin and Grachev could have already executed the first stage of their plan without sparing any expense.
It’s worth noting that Suleiman Kerimov had previously expressed interest in acquiring a controlling stake in Detsky Mir in 2017-18. However, his plan to purchase over 52% of the company’s shares from Sistema AFC did not materialize at the time.
Despite speculation that Stiskin and Grachev’s acquisition of Detsky Mir shares was done to benefit Kerimov, Grachev refuted these claims in April 2022. He stated that the shares were purchased with personal and borrowed funds, and that it was a personal project.
While it’s possible that Stiskin and Grachev left Polyus to act as intermediaries for Kerimov and German Gref in obtaining a share in the company, there are still several possibilities, and the situation remains uncertain.
About the author: Matthew Johnson
Matthew Johnson, a small tech business owner retired and found his passion in journalism.