Russian IT major Softline to hold IPO, use cash for M&As

Russian IT major Softline to hold IPO, use cash for M&As
Softline announced an IPO and hopes to raise $500mn in the latest addition to Russia's IPO boom. The company has rapidly built up an international business in recent years.
By bne IntelliNews October 1, 2021

Softline, an international digital transformation and cybersecurity solution and service provider with Russian roots, has announced it will hold an Initial Public Offering (IPO) on London Stock Exchange, the company said on September 30.

With half its business in Russia, the company has been rapidly expanding overseas and now styles itself as an international company with Russian roots.

“Russia still makes up about half our business, but we are a truly international company now,” Softline CEO Sergey Chernovolenko told bne IntelliNews in an exclusive interview. “We serve all the big markets but we have a focus on the emerging markets, as the growth potential in those markets is bigger.”

The listing will raise cash to continue that strategy that was developed in co-operation with the company’s key investor Da Vinci Capital, which bought a 20% stake in Softline four years ago.

“We are the only independent stakeholder and we helped to de-Russify it,” Da Vinci manager Denis Fuller told bne IntelliNews in a recent interview. “When we bought in about 80% of its business was Russian, but now it has fallen to around 60%. We helped them with M&A of international companies and now it operates in 55 countries. The company is getting ready for an IPO in October, a dual listing in London and Moscow.”

As followed by bne IntelliNews since 2018, Softline was among the Russian mid-caps slated for and expected to IPO in the next two-three years. Previously tech and digital Russian companies holding a successful IPO included HeadHunter job searching portal and Ozon Holdings e-commerce major.

Previously the company has tapped the debt market, being one of the few Russian tech names to issue bonds, placing exchange bonds in October and April 2020, and back in December 2017.

Softline has announced it aims to raise about $400mn in the offering, but bne IntelliNews sources close to the deal say the target is to raise a total of $500mn from new global depository receipts (GDRs) and "existing shares to be sold by certain existing shareholders". The offering will be organised by Credit Suisse, JP Morgan and domestic VTB Capital (VTBC).

Notably, Softline is determined to use the proceeds from the IPO to fuel further growth, including via selective acquisitions in accordance with the group’s complimentary M&A strategy. 

"Today the total IT market in emerging markets is worth about $250bn, but in five years' time the business will be worth about $400bn," said Chernovolenko.

The company's strategy "combines organic expansion and complimentary M&A transactions, enabling us to continue to deliver a full range of IT services to a large and growing market of customers, while strengthening robust and long-standing relationships with an expanding universe of partner vendors,” the head and founder of Softline Igor Borovikov commented in the press release.

Borovikov founded the company in 1993. Softline started life as a software reseller. The Soviet Union had collapsed two years earlier and one of the first foreign products to arrive in the newly minted Russia was Western software.

For the next 17 years Softline built this business up but computing was changing rapidly and in 2000 Borovikov decided he needed to diversify. From being a local software reseller in Russia with 10 employees, the company has grown into a global IT solutions and services provider, with $1.8bn annual turnover and more than 5,000 employees operating in over 55 countries.

Other shareholders of Softline include Da Vinci Capital, a leading independent Private Equity fund, Zubr Capital, a Belarusian private equity fund, and previously Sovcom Bank had a stake, but the company bought it back last year.