Mercury said it plans to turn the $60 million store and Moscow landmark into Russia's answer to luxurious Paris department store Galleries Lafayette over the next two to three years.
Mercury president and co-owner Leonid Fridland and former TsUM board chairman Lev Khasis announced Wednesday that Mercury had become the new strategic investor in the store, which commanded sales of $38 million last year according to United Financial group.
Mercury had sales of $150 million in 2001 and this year is anticipating revenues of $300 million, a source close to the company said.
The deal, which Fridland and Khasis described in a joint statement as "a revolution in the economic history of TsUM," will be completed by the end of the year.
Khasis, who together with TsUM management and the OLMA investment company currently control 60 percent of the store's shares, will leave his post in about a month's time.
Khasis had announced earlier that he would be leaving the company. He said he would sell the bulk of his shares to OLMA and invest the proceeds of the sale in the Perekryostok supermarket chain. Khasis said he would retain a stake "far smaller than a controlling stake" in TsUM.
It emerged Wednesday that OLMA was the middleman between TsUM and Mercury.
"After receiving my shares in TsUM, OLMA took charge of a group of shareholders affiliated with me," Khasis said.
"I don't know how they [Mercury and OLMA] see the structure of the deal and I cannot comment on their behalf," he said.
OLMA and Mercury's representatives declined to provide any details before the deal is concluded. A spokesman for Brunswick Capital Management, which holds a 12 percent stake in TsUM, said he had not heard any details of the deal. Earlier, Khasis announced that OLMA had both the intention and authority to sell the controlling stake in TsUM.
TsUM's official statement said that "the experience and professionalism ... undoubtedly will allow TsUM's new partners to raise the department store to world standards."
Mercury is a newcomer to managing a store of this kind. Fridland said the development plan was just being developed, but could not say how much was to be invested. Other investors would be brought on board, he said.
Fridland claimed that although prices in the store will increase, they will remain accessible for shoppers of average means.
Renovation of the old section of TsUM will continue, as well as construction of a new block.
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