MOSCOW (Reuters) – Russian grocery chain Magnit has made a $1.78 billion non-binding and indicative proposal to smaller competitor Lenta, topping a rival offer from Russian steel magnate Alexey Mordashov, Lenta said on Friday.

The arrival of a second potential bidder for Lenta inflates competition for the third-largest grocery retailer in Russia amid a decline in the shares of many Russian food retailers over the past year.

Magnit sent its proposal to Lenta on April 1, the same day U.S. private equity fund TPG and the European Bank for Reconstruction and Development (EBRD) agreed to sell their 42 percent stake in Lenta to Mordashov.

Lenta said on Friday it had received the proposal from Magnit to buy 100 percent of the company for $3.65 per global depository receipt (GDR).

Mordashov, whose Severgroup boasts Russian steel producer Severstal at the heart of its empire, had agreed to buy the 42 percent stake, to be followed by a cash offer for all the group’s outstanding shares, at $3.60 per GDR.

Severgroup declined to comment. Its deal with TPG and the EBRD is binding and expected to be approved by Russia’s anti-monopoly regulator by the end of May. Remaining shareholders are free to sell their shares to whoever they want and Mordashov could conceivably resell to Magnit.

Lenta said on Friday its independent directors had asked Magnit to confirm it wanted to pursue a deal in light of Mordashov’s offer and, if so, to provide details about timing and any conditions.

Magnit has not yet provided those details, Lenta said.

Magnit confirmed that it was exploring a possible acquisition of 100 percent of Lenta’s business. It, however, said that it was Lenta that had not replied to its letter with details on the proposed deal structure and terms on April 1.

“Magnit is looking forward to receiving a response from Lenta and will then consider how it intends to proceed,” it said in a statement, adding that no assurances can be given that any transaction would take place.

Lenta’s London-listed GDRs were up 1.3 percent at $3.58 on Friday.

Lenta, with a 3.2 percent share of the Russian retail market, could help to boost Magnit’s market leadership, while for Mordashov it would add a physical chain to his Utkonos business, the largest online grocery retailer in Russia, an industry source told Reuters.

Prosperity Capital Management, which owns about 7 percent in Lenta, a stake in Magnit and rival X5, believes the price offered by Mordashov undervalues Lenta, while a deal with Magnit could achieve substantial cost savings, Alexey Krivoshapko, a portfolio manager at Prosperity, said.

He said he hopes Magnit will make a formal bid for Lenta.

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