IN THE Russian business community Sergei Galitsky served as a rare example of a self-made billionaire who rose with relatively little state help and outside the natural-resources trade. He built his retail company, Magnit, from scratch into Russia’s largest network; it has more than 16,000 stores. Rather than moving to Moscow, he kept his headquarters in his hometown of Krasnodar, where he also founded a football club. On February 16th he made a telling exit, announcing he would sell nearly all of his shares in Magnit—29.1%—to VTB, a state bank.

That Mr Galitsky (pictured, above) decided to sell is the result of a tough business cycle and some strategic mistakes. More remarkable is that he found a buyer not on the domestic private markets, or from among foreign investors. Selling to a public-sector bank reflects the growing role of the state in the Russian economy. Russia’s federal anti-monopoly service puts its share at 70%. Yet the retail sector had largely been insulated from the trend. Now the Magnit deal could become “a landmark for Putinomics”, wrote Tatiana Stanovaya of Moscow’s Center of Political Technologies this week, marking the expansion of the state into a sphere where private competitors had reigned. Businessmen make mistakes, she noted, “but in market conditions this doesn’t automatically lead to the sale of assets to state structures”.

Mr Galitsky got his start selling household chemicals and cosmetics in the mid-1990s before expanding into groceries and retail. Magnit kept prices low, focusing on working-class customers, and ventured into far-flung towns and small cities that large retailers typically avoided because of the complex logistics involved. The strategy paid off. Magnit is Russia’s largest retail network in terms of stores. The Boston Consulting Group said that between 2009 and 2013 it created the most value of any retail network globally.

Yet recent years have been rough for Magnit. Russia’s recession in 2014-16 hit consumers hard. Though the economy returned to modest growth in 2017, Magnit’s profits fell by over one-third. X5 Retail Group, its main competitor, has overtaken it in terms of revenue. Magnit’s share price had been plunging, and the company will not pay dividends this year. Mr Galitsky says his vision began clashing with investors’ wishes. “If investors want changes, they should get them,” he said.

Pending anti-monopoly approval, VTB will pay 138bn roubles ($2.4bn), a 4% discount at the time of purchase. Investors took the news glumly; on the day of the announcement Magnit’s shares fell by 10% in London, and nearly 8% in Moscow. Many worry that VTB lacks the expertise and attention to manage Magnit’s complex retail business effectively. Western sanctions on VTB add another set of risks. In addition, by buying a stake of less than 30%, VTB avoided a legal obligation to offer buyouts to minority shareholders. “It’s a slap in the face to all investors,” Aleksei Krivoshapko of Prosperity Capital Management, a minority stakeholder, told Vedomosti, a Russian business daily.

For VTB, Magnit offers an attractive equity-investment opportunity. It aims to spend several years rebuilding Magnit before reselling its stake. “We’re not going to stay in the asset forever,” said Andrei Kostin, the bank’s chief executive. VTB also announced a partnership to merge Magnit’s transport and logistics operations with the Russian postal service.

The sale means the end of an era for Mr Galitsky, though it may be for the good. “When you’re under constant stress, sometimes you think a nightmare ending would be better than a nightmare without end,” he told a business school in 2016. He will exit as chief executive and resign his board seat, keeping only 3% of the firm. He will give his new free time to youth football.