PJSC “Magnit” (“Magnit” or the “Company”; MOEX and LSE ticker: MGNT), one of Russia’s leading retailers, informs that its shareholder Lavreno Limited (the “Selling Shareholder”) has initiated the process for the sale of approximately $ 700 million worth of ordinary shares of the Company owned by it (the “Sale”) in the form of local Ruble denominated shares. It is intended that after the Sale the Company will increase its share capital through an offering of newly issued shares (the “New Shares”) in an open subscription (the “Open Subscription”). Subject to availability of necessary quantity of the New Shares after the exercise of the pre- emptive rights by other shareholders, the Selling Shareholder intends to use all of the proceeds from the Sale to purchase the New Shares and has indicated the intention to purchase an additional 250,000 of New Shares from Magnit. The Company intends to use the proceeds from the additional share issue to finance its store roll-out program, store renovation program and vertical integration program. Portion of the proceeds may be also used by the Company to optimise net indebtedness position, in line with Company’s overall conservative balance sheet strategy and to finance its current operating activities.

In connection with the Sale, shares in the Company are being offered by way of an accelerated bookbuild (the “Bookbuild”), which will be launched immediately following this announcement. Merrill Lynch International and VTB Capital plc (the “Joint Global Coordinators” and the “Joint Bookrunners”) are acting as joint global coordinators and joint bookrunners in connection with the Sale.

The shares offered in the Sale (“Sale Shares”) will be placed under the Bookbuild with international institutional investors in accordance with Regulation S of the US Securities Act of 1933, as amended (the “US Securities Act”), and to qualified institutional buyers in the US in accordance with Rule 144A of the US Securities Act. The Ruble price per share, the final number of shares sold, and allocations will be determined following completion of the Bookbuild.

Based on information available to the Company, the Selling Shareholder will acquire the Sale Shares from Mr. Sergey N. Galitskiy (Chief Executive Officer and shareholder of the Company) under a repo transaction with the Selling Shareholder’s obligation to sell back to Sergey N. Galitskiy after a designated period.

In connection with the Sale, each of the Company, Mr. Sergey N. Galitskiy and the Selling Shareholder have agreed to lock-up arrangements on customary terms for 90 days following the completion of the Sale (subject to customary exceptions and with the prior consent of the Joint Global Coordinators).

Mr. Sergey N. Galitskiy has also made clear his intention to remain a long-term strategic investor in the Company.

Primary Capital Raise by the Company

It is intended that the Sale will be followed by an increase in the Company’s share capital through an offering of the New Shares (together with the Sale Shares, the “Shares”) in the Open Subscription. The Open Subscription is expected to be approved by the Board of Directors of the Company immediately after the Sale, and the offering price of the New Shares is expected to be set at the same level as the price of the Sale Shares. The Company understands that, subject to availability of necessary quantity of the New Shares after the exercise of the pre- emptive rights by other shareholders, the Selling Shareholder intends to use all of the proceeds from the Sale to purchase the New Shares and has indicated intention to purchase an additional 250,000 of New Shares from Magnit. Mr. Sergey N. Galitskiy has informed the Company that he does not intend to exercise his pre-emptive rights to subscribe for any New Shares.

The Company intends to use the proceeds from the Open Subscription to invest into store roll-out program and vertical integration program.

Store roll-out (approximately 60% of the proceeds). The Company’s guidance for 2017 implies net openings of 2,000+ convenience stores, 21 hypermarkets and Magnit family stores as well as 670 cosmetics stores. The Company’s management plans to maintain high pace of expansion in 2018. The Company intends to use approximately 25% of the proceeds to open convenience stores and approximately 15% of the proceeds to open cosmetics stores. In addition, the Company is currently in active stage of store renovation program with total of up to 2,200 units planned for renovation in 2017 and substantial pipeline afterwards. Renovated stores aim to demonstrate up to 10% sales growth on average.

Vertical integration (approximately 40% of the proceeds). The Company has also developed and approved its mid-term strategy with regards to vertical integration, assuming total estimated investment of up to RUB 80bn within next three years. The strategy is focused on further development of agricultural and in- house production clusters in the Krasnodar, Tver and Toliatti regions.

In agriculture, the Company plans to increase production capacity within existing categories of fresh produce and also launch construction of the second greenhouse complex in 2018 to grow tomatoes and other greenhouse vegetables. The target payback period for agricultural investments is up to 7 years. The Company intends to use approximately 15% of the proceeds for this area.

The core project within in-house production is the ’Industrial Park Krasnodar’, which is to specialize on production of a wide assortment of food products (incl. among others, mushroom compost, pasta, flour confectionary, sweets and candies, frozen prepared foods, ice-cream, frozen vegetables and fruits, juices, baby food, canned food, cheese, butter, fish products, snacks, pet food) as well as non-food goods (incl. among others, hygiene, cosmetics and household products). The total investment in the ’Industrial Park

Krasnodar’ is estimated at up to RUB 40bn and the targeted payback period for in-house production investments is up to 4-5 years. The Company intends to use approximately 25% of the proceeds for investments in ’Industrial Park Krasnodar’.

— The Company is aiming for substantial positive impact from vertical integration initiatives, once the current and planned projects are fully invested and reach appropriate capacity levels. Long term positive impact on net income profitability may reach up to 100-150 bp.

A portion of the proceeds may also be used to optimise net indebtedness position, in line with Company’s overall conservative balance sheet strategy and to finance its current operating activities.

The Joint Global Coordinators and Joint Bookrunners are acting for the Selling Shareholder in connection with the Sale and are not acting for the Company, the Selling Shareholder or any other person in any capacity in connection with the Open Subscription.

Magnit announces launch of share sale