X5 Retail Regulatory News (FIVE)

28 Aug 2008 07:00



The headline for the X5 Retail announcement released on 26 August 2008 at 07:01

under RNS No 9802B should read "Post-closing agreement on Karusel". 

The announcement text is unchanged and is reproduced in full below.

X5 AND FORMER SHAREHOLDERS OF FORMATA

RESOLVE OUTSTANDING ISSUES ON KARUSEL ACQUISITION 

Amsterdam, 26 August 2008 - X5 Retail Group N.V. ("X5" or the "Company"), Russia's largest retailer in terms of sales (LSE ticker: "FIVE"), announces today that an agreement with the former shareholders of Formata B.V. ("Formata"), the owner of the Karusel hypermarket chain (the "Former Shareholders"), has been reached to resolve the outstanding post-completion issues on the recent acquisition.

On 27 June 2008 X5 announced that it had completed the acquisition of the entire issued share capital of Formata pursuant to the exercise of a Call Option Agreement dated 11 April 2006. The Company also announced that there were certain outstanding issues with the Former Shareholders, including real estate development contracts between Formata and the affiliates of Donson B.V. (which is associated with the Former Shareholders) (the "Donson Contracts") and significant prepayments made under these contracts.

Since completion of the Share Purchase Agreement, X5 has been in constructive discussions with the Former Shareholders how best to resolve these issues. The agreement now reached is that it is in the best interest of all the Company's shareholders to unwind the Donson Contracts and to refund all of the prepayments made under this contracts - in the amount of approximately RUR 3.9 billion (an equivalent of approximately USD 160 million) - to Formata. After the termination, the parties will have no outstanding obligations under these contracts. Additionally, the Former Shareholders will pay to X5 approximately USD 40 million representing their compliance with post-completion obligations under the Call Option Agreement. 

At the same time, on Friday, 22 August 2008, the Russian Federal Financial Markets Service (FFMS) has annulled previously registered issue of corporate ruble bonds by Hyperfinance LLC, a subsidiary of Donson, which initially was supposed to be guaranteed by Formata and its subsidiaries. Thus, any obligations of Formata or its subsidiaries with respect to Hyperfinance bonds have been effectively terminated.

Commenting on today's announcement, Lev Khasis, the CEO of X5 Retail Group said:

"This agreement in fact represents successful completion of two landmark M&A transactions in Russian retail - merger between Perekrestok and Pyaterochka and acquisition of Karusel by X5, which resulted in creation of a full-scale multi-format Russian retailer and an unrivalled leader in the sector".

Andrei Rogachev, one of the former owners of Formata and existing shareholder in X5 Retail Group added:

"We are happy that all the outstanding issues between X5's shareholders have now been resolved. Remaining the largest minority shareholders in X5, we expect to benefit from the Company's enlarged scale and strong exposure to hypermarkets". 

Note to Editors:

X5 Retail Group N.V. is Russia's largest retailer in terms of sales. The Company was created as a result of a merger between Pyaterochka (soft discounter chain) and Perekrestok (supermarket chain) on 18 May 2006.

As at 30 June 2008, X5 operated 991 store located in Moscow, St. Petersburg, other regions of European Russia and the Urals, as well as in Ukraine. X5's multiformat store network comprises 762 soft discount stores under "Pyaterochka" brand, 190 supermarkets under "Perekrestok" brand and 39 hypermarkets under "Karusel" and "Perekrestok" brands.

As of 30 June 2008, X5's franchisees operated 710 stores across Russia and in Kazakhstan.

X5's net sales for the full year 2007 reached USD 5,320 mln, an increase of 53% year-on-year. Gross profit for the period totaled USD 1,404 mln, EBITDA amounted to USD 479 mln. Full year 2007 net income reached USD 144 mln.

X5 Retail Group N.V.'s net retail sales for the first half 2008 surged 61% in USD terms and reached USD 3,744 mln (excluding Karusel). Including Karusel on pro-forma basis the Company's net retail sales for the first half 2008 totaled USD 4,303 mln.

Forward looking statements:

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by 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 other words of similar meaning.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond X5 Retail Group N.V.'s control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-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 any applicable laws or regulations, X5 Retail Group N.V. undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document.