Etalon Group 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.
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.”