(Bloomberg) — In 1998, Sergei Galitsky opened a small grocery in his hometown of Krasnodar, 1300 kilometers south of Moscow.
Over the next two decades he expanded that modest operation into an empire with almost $20 billion in sales and 16,000 stores across Russia, amassing a fortune valued at some $5 billion in the process. On Friday, he walked away.
Galitsky will quit as chief executive officer of Magnit PJSC after selling 138 billion rubles ($2.5 billion) of shares — 29 percent of the company — to the state-controlled VTB Group, Magnit said in a regulatory filing. Though he had been cutting his stake in the chain in small increments in recent years, the market was surprised to see him bail almost entirely — selling his shares at 3.9 percent below Thursday’s closing price. After Friday’s deal, Galitsky owns about 3 percent of Magnit.
The disposal comes after Magnit had struggled to manage its rapid expansion and fend off competitors, especially X5 Retail Group NV, controlled by rival billionaire Mikhail Fridman. With its sales growth slowing, Magnit in 2016 ceded the title of Russia’s largest retailer to X5, and its shares have fallen by more than half in the past 12 months. Magnit dropped as much as 7 percent in Moscow trading on Friday, to the lowest since 2012.
Galitsky said he decided to sell because his views on running Magnit clashed with those of other shareholders, as the market demanded fast growth and he preferred to focus on profitability, Interfax reported.
“It was a difficult decision since I founded this company,” he said at a signing ceremony in Sochi, clearly emotional, in a broadcast shown on RBC television. “But nothing is forever. I shouldn’t oppose this process. If investors want changes, they should get them.”
The haste with which the deal was put together, the relatively low price, and the fact that the buyer was a state-controlled bank indicate that Galitsky made “an emotional rather than a rational decision,” said Alexei Krivoshapko, director at Prosperity Capital who helps manage $4.2 billion in assets, including Magnit shares.
Crowds gathered outside Magnit’s headquarters on Friday to say goodbye to Galitsky and chanting “thank you!”