Detsky Mir announces an initial public offering (IPO)

Detsky Mir Public Joint-Stock Company has announced the price of the initial public offer of ordinary shares of the company on the Moscow Exchange at the level of 85 rubles.

The total supply is approximately 21,1 billion rubles. in the case of the full exercise of the option of additional placement or approximately 18,4 billion rubles, not including the option of additional placement. The company's market capitalization at the start of trading will be approximately 62,8 billion rubles. The start of trading is scheduled for February 10 2017 under the ticker “DSKY”

The offer includes the sale by the existing shareholders of 247 shares, which corresponds to 912% of the company's current share capital in the event of full exercise of the additional offering option, or 160 shares, which corresponds to 33,55% of the company's current share capital, excluding the option additional placement.

The selling shareholders are:

AFK Sistema (hereinafter referred to as "Sistema") held a 72,57% stake in the company prior to the offering and sold 145,055,738 shares, representing approximately 19,63% of the company's share capital, with the option to increase the number of shares sold to 166,814,099 (approximately 22,57% of the company's share capital) if the over-allotment option is exercised. Following the offering, AFK Sistema will retain at least 50% + 1 share in PJSC Detsky Mir.

The Russia-China Investment Fund (RCIF), a joint venture between the Russian Direct Investment Fund (RDIF) and China Investment Corporation (CIC), through its investment companies Floette Holdings Limited and Exarzo Holdings Limited, held a 23,10% stake in the company prior to the offering and sold 64,260,870 shares, representing approximately 870% of the company's share capital, with the option to increase the number of shares sold to 73,900,000 (approximately 10,00% of the company's share capital) if the over-allotment option is exercised. Following the offering, RCIF will retain at least 13,1% of Detsky Mir's capital.

Certain individual shareholders , including certain members of the company's management and AFK Sistema, held a combined 4,33% stake in the company prior to the offering and sold 7,198,061 shares, representing approximately 0,97% of the company's share capital. Following the offering, these individual shareholders will retain a combined 3,35% stake in Detsky Mir.

In connection with the offer, Sistema JSFC, Floette Holdings Limited and Exarzo Holdings Limited provided the joint bookrunners with an additional placement option in the amount of up to 15% of the number of shares sold by them at the offer price.

In connection with the offer, Goldman Sachs, acting as a stabilization manager, is entitled to acquire up to 30 31 397 shares on the market for 491 calendar days from the date of this announcement.

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Lock-up restrictions will apply for 365 days for company management and 180 days for other selling shareholders and the company.

Credit Suisse, Goldman Sachs International and Morgan Stanley act as joint global coordinators and joint proposal bookrunners. Sberbank CIB and UBS Investment Bank act as joint bookrunners.

The Detsky Mir Group is the largest specialized children's goods retailer in Russia, with a diversified product portfolio including toys, baby products, clothing and footwear, furniture, and other categories. The Group is the leader in terms of network size and revenue in the highly fragmented Russian children's goods market. According to Ipsos Comcon, in 2015, the Group's estimated market share was 32% (24% in 2014) of the specialized children's goods retail market in Russia and 13% (10% in 2014) of the overall children's goods market (including hypermarkets and supermarkets). By comparison, according to Ipsos Comcon, in 2015, the Group's closest competitor had a market share of 9% among specialized retailers and 4% of the overall children's goods market.

As of December 31 of 2016 of the year, the Detsky Mir retail network consisted of 525 stores. The network included 468 stores in Russia and 12 in Kazakhstan under the Detsky Mir brand, as well as 45 stores under the ELC brand in Russia. ELC stores offer a wide range of educational, developmental and other toys for both newborns and children up to 14 years old. The total area of ​​retail premises of the network as of December 31 of 2016 was approximately 596 000 sq. m. Today, stores located outside of Moscow, generate approximately 70% of the total revenue of the network. The group focuses on the development of the network in cities with populations over 50 000 people and today is already present in 171 from about 300 cities that meet this requirement, based on Rosstat data as of December 31 2016. Detsky Mir has stores in all the 20 largest cities in Russia and in the 7 largest cities in Kazakhstan.

In addition to retail stores, Detsky Mir offers its entire range of products for purchase on its own websites. Over the 9 months of the 2016 of the year, Detsky Mir recorded more than 63 million visits to the online store site and completed more than 1 million online orders.

In accordance with the dividend policy adopted by Detsky Mir, the company allocates at least 50% of annual net profit (based on full-year IFRS statements) to pay dividends, provided that the group does not need additional financial resources for investment or execution their obligations as they fall due. The decision on the payment of dividends must be approved by the general meeting of shareholders after the relevant recommendation of the board of directors of the company.