Burger Rus, the Russian operation of the Burger King fast food chain, could hold an IPO on the Moscow Exchange this year, Reuters reported on April 22 citing unnamed banking sources. Reportedly, VTB Capital together with Morgan Stanley and JP Morgan will be organising the IPO.

While not a single IPO or SPO was seen in 2018, since the start of this year a number of companies have announced deals including Polyus Gold, which raised $390mn from a placement and rail operator RusTransCom that announced IPO plans, among others. However, the SPO by meat major Cherkizovo failed, as reported by bne IntelliNews.

Fast food was the fastest growing segment of the Russian catering market in 2018, expanding by 13% year-on-year to RUB1.52 trillion ($23.8bn), and taking almost 50% of the market. The fast food segment is growing fastest in Russia’s far-flung regions, due to lower incomes of the consumers.

Analysts surveyed by Vedomosti believe that Burger Rus is an attractive asset, but perhaps too small for an IPO, with estimated revenues of little over RUB50bn ($784mn) in 2019 and a valuation of about RUB34-37bn. But the catering market is underrepresented on the equity market, which could raise investor interest.

The franchisee of Burger King in Russia is 100% owned by Cyprus-based Burger King Russia, controlled by VTB Capital (acquired 48.8% stake in 2012 for $50mn), and Xomeric Holding (20%, reportedly affiliated with Ukrainian bankers Makar Pasenyuk and Konstantin Stetsenko). The chain operates 550 Burger King restaurants in Russia.

Previously DP Eurasia, that operates the Domino’s Pizza brand in Turkey, Russia, Azerbaijan and Georgia, IPO’d in London in 2017 raising GBP148mn by placing 74.1mn existing and new ordinary shares with investors at a placing price of 200 pence per share. DP Eurasia’s market capitalisation on admission, based on the placing price, is approximately £291mn.

Founded in Turkey in 1996, DP Eurasia is the largest pizza delivery company in Turkey, the third largest in Russia and the fifth largest franchisee within the global Domino’s Pizza brand. 

The fast food business has also caught the eye of Russia-dedicated funds. Leading private equity fund Baring Vostok Capital Partners (BVCP) acquired 37% in PJ Western in March 2018, the master franchisee of fastfood chain Papa John's in Russia, CIS, and Central Europe, buying out a part of minority shareholder Capman fund and a new share issue, in the fund’s first catering investment.

PJ Western operates 146 Papa John’s restaurants in Russia, CIS, and Poland and is one of the largest franchisees of the chain in the world. In 2017 the company made RUB4.5bn ($78mn) in revenues and plans to triple the number of restaurants to 450 by 2020, with an investment of $50mn.

And the Alfa group of oligarch Mikhail Fridman bought into the franchisee of Sbarro brand in Russia, Kazakhstan and Azerbaijan, Dodo Pizza chain in 2018, raising $7.5bn in a private offering to investors.