X5 Retail Regulatory News (FIVE)

26 Oct 2007 07:02

X5 Retail Group N.V.26 October 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN X5 RETAIL GROUP N.V. SIGNS AN AGREEMENT TO ACQUIRE KORZINKA RETAIL CHAIN IN LIPETSK REGION Amsterdam, 26 October 2007 - X5 Retail Group N.V., Russia's largest foodretailer in terms of sales (LSE ticker: "FIVE"), announced today that it signedan agreement to acquire 100% of the business and assets of the Korzinka retailchain (Russian equivalent of the "Basket"), for a total consideration of US$115million, including debt. Korzinka is the largest and fast growing retail chain in the Lipetsk region. Thecompany's expected sales is US$190 million excluding VAT for 2007. X5 Groupwill acquire 22 stores in total, of which 15 will be integrated into the Group'sdiscounter format, 6 into the supermarket format and one store will be added tothe hypermarket network. Central region which includes city of Lipetsk is one of the most attractive inRussia, accounting for 19% of the country's population and 14% of its total foodretail market (excluding the Moscow region). The region accommodates Russia'sleading manufacturers, such as Novolipetsk Steel (NLMK), Lebedyansky, Cherkizovogroup and many others, shaping up the fast-growing local economy and ensuringhigh purchasing power of the region's population. X5 has entered into theregion in 2005 and at the time of acquisition already operated one hypermarketand four supermarkets, and also had an active new site development program. The total area of the Korzinka outlets is 38,007sq.m, of which 12,352 sq. m. areowned, while average length of lease agreements for the remaining space is 10years (including the hypermarket). The net selling space represented by theoutlets is 19,966 sq. m. Denis Gritsaenko, the ex-Head of X5 operations in discounter format in theMoscow region, has been appointed to manage the Company's Central region filial,and will be responsible for Korzinka's integration into the Group's operations. Lev Khasis, X5 Retail Group CEO, commented: "This is a transaction of strategic importance for X5 Retail Group. We areclearly established as the main consolidator of the food retailing sector inRussia. The purchase of Korzinka allows X5 to establish market leadership in oneof the most important regions. It underpins X5's focus on regional expansionand supports the Group's intention to secure clear leadership in every marketand region it operates. No need to say that Korzinka fits organically into themulti-format growth strategy of our Group and allows us to roll out Pyaterochkadiscounters into this region in anticipation of our plans". Andrei Gusev, Mergers, Acquisitions and Business Development Director at X5Retail Group added: "With Korzinka X5 not only secured a strong platform for its rapid expansioninto one of the most attractive Russian regions - we acquired an established,fast growing and efficient business. We were impressed with its loyal andmotivated employees and management team. Going forward, we expect significantsynergetic effects in all areas of combined regional operations, includingpurchasing, store operations, and development." The transaction is subject to the normal regulatory approvals, includingapproval by the Federal Antimonopoly Service (FAS), and is expected to be closedby the end of 2007. - End - Note to Editors: X5 Retail Group N.V. is Russia's largest food retailer in terms of sales. As of30 September 2007, the Group had 573 company-managed soft discount storeslocated in Moscow (256), St. Petersburg (234) and other Russian areas (83), 163company managed supermarkets across Central Russia and Ukraine, including 101stores in Moscow (Moscow region and Yaroslavl region), and 13 company managedhypermarkets. As of 30 September 2007, X5's franchisees operated 627 stores across Russia andKazakhstan. Pyaterochka and Perekrestok have merged their operations as of 18 May 2006 tocreate the clear leader in the Russian food retail market. The Group's Net sales for the 1H 2007 were US$ 2,348 million, up +49% vs. 1H2006. Pyaterochka chain provided US$ 1,306 million of net sales; the Perekrestokchain contributed US$ 1,042 million of net sales. Forward looking statements: This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identifiedby the fact that they do not only relate to historical or current events.Forward-looking statements often use words such as" anticipate", "target", "expect", "estimate", "intend", "expected", "plan", "goal" believe", or otherwords of similar meaning. By their nature, forward-looking statements involve risk and uncertainty becausethey relate to future events and circumstances, a number of which are beyond X5Retail Group N.V.'s control. As a result, actual future results may differmaterially from the plans, goals and expectations set out in theseforward-looking statements. Any forward-looking statements made by or on behalf of X5 Retail Group N.V.speak only as at the date of this announcement. Save as required by anyapplicable laws or regulations, X5 Retail Group N.V. undertakes no obligationpublicly to release the results of any revisions to any forward-lookingstatements in this document that may occur due to any change in its expectationsor to reflect events or circumstances after the date of this document. This information is provided by RNS The company news service from the London Stock Exchange