June 14, 2018 / 5:28 PM / 10 months ago

UPDATE 1-Ceconomy in talks to sell Russian business, take stake in M.video

* Media-Saturn could pay 258 mln euros for 15 pct in M.video

* Non-binding agreement reached

* Deal would eliminate Media-Saturn losses in Russia

* Ceconomy sees one-time hit to 2017/18 net profit (Adds details, background)

BERLIN, June 14 (Reuters) - German consumer electronics group Media-Saturn is in advanced talks to sell its loss-making Russian business to Safmar and take a 15 percent stake in Safmar’s M.video, parent firm Ceconomy said on Thursday.

Russia’s top two electrical goods and home appliances retailers — M.video and Eldorado — are preparing to merge and Ceconomy said in January that it was seeking a “strategic answer” to its poorly performing Russian business by the end of 2018.

If a deal is concluded Media-Saturn would pay about 258 million euros ($300 million) for the M.Video stake based on current exchange rates, although that could be cut depending on financial performance, Ceconomy said in a statement.

It said a non-binding agreement had been reached, adding that the transaction would entirely eliminate the operational losses of Media-Saturn’s Russian business, but have a one-time hit to Ceconomy’s net profit for the 2017/18 financial year of more than 100 million euros.

In April, Reuters was first to report that Media-Saturn was in talks with M.video about disposing its Russian business.

Ceconomy in January said one of its priorities for the year was improving its performance in Russia, noting it had already cut costs and store sizes.

Its sales in Russia fell by 7 percent to 526 million euros in the 2016/17 financial year as it closed five stores to bring the total to 57. It said in May sales continued to decline in the first half of the 2017/18 fiscal year.

The Russian retail market has been recovering from a slump, supported by falling interest rates and slowing inflation, and M.video’s sales grew 8.2 percent to 234 billion roubles ($3.76 billion) in 2017 when it opened 27 new stores.

M.video and Eldorado are majority owned by Russia’s Safmar, which is controlled by the family of oil-to-real estate tycoon Mikhail Gutseriev. ($1 = 0.8602 euros) ($1 = 62.2104 roubles) (Reporting by Emma Thomasson; Editing by Elaine Hardcastle)

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