OREANDA-NEWS. X5 Retail Group N.V., Russia's largest food retailer in terms of sales, announced on October 26 that it signed an agreement to acquire 100% of the business and assets of the Korzinka retail chain, for a total of US$115 million, including debt, the company's press service announced.

Korzinka is the largest and fast growing retail chain in the Lipetsk region. The company's expected sales is US$190 million excluding VAT for 2007.  X5 Group will acquire 22 stores in total, of which 15 will be integrated into the Group's discounter format, 6 into the supermarket format and one store will be added to the hypermarket network. Central region which includes city of Lipetsk is one of the most attractive in Russia, accounting for 19% of the country's population and 14% of its total food retail market (excluding the Moscow region). The region accommodates Russia's leading manufacturers, such as Novolipetsk Steel (NLMK), Lebedyansky, Cherkizovo group and many others, shaping up the fast-growing local economy and ensuring high purchasing power of the region's population.  X5 has entered into the region in 2005 and at the time of acquisition already operated one hypermarket and four supermarkets, and also had an active new site development program.The total area of the Korzinka outlets is 38,007 sq.m., of which 12,352 sq. m. are owned, while average length of lease agreements for the remaining space is 10 years (including the hypermarket). The net selling space represented by the outlets is 19,966 sq. m.

Denis Gritsaenko, ex-Head of X5 operations in discounter format in the Moscow region, has been appointed to manage the Company's Central region susidiary, 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 are clearly established as the main consolidator of the food retailing sector in Russia. The purchase of Korzinka allows X5 to establish market leadership in one of the most important regions.  It underpins X5's focus on regional expansion and supports the Group's intention to secure clear leadership in every market and region it operates. No need to say that Korzinka fits organically into the multi-format growth strategy of our Group and allows us to roll out Pyaterochka discounters into this region in anticipation of our plans."
Andrei Gusev, Mergers, Acquisitions and Business Development Director at X5 Retail Group added: "With Korzinka X5 not only secured a strong platform for its rapid expansion into one of the most attractive Russian regions - we acquired an established, fast growing and efficient business. We were impressed with its loyal and motivated employees and management team. Going forward, we expect significant synergetic effects in all areas of combined regional operations, including purchasing, store operations, and development.The transaction is subject to normal regulatory approvals, including approval by the Federal Antimonopoly Service (FAS), and is expected to be closed by the end of 2007.

X5 Retail Group N.V. is Russia's largest food retailer in terms of sales. As of 30 September 2007, the Group had 573 company-managed soft discount stores located in Moscow (256), St. Petersburg (234) and other Russian areas (83), 163 company managed supermarkets across Central Russia and Ukraine, including 101 stores in Moscow (Moscow region and Yaroslavl region), and 13 company managed hypermarkets.

As of September 30, 2007, X5's franchisees operated 627 stores across Russia and Kazakhstan. Pyaterochka and Perekrestok have merged their operations as of  May 18 2006, to create a leader in the Russian food retail market. The Group's Net sales for the 1H 2007 were US$ 2,348 million, up +49% vs. 1H 2006. Pyaterochka chain provided US$ 1,306 million of net sales; the Perekrestok chain contributed US$ 1,042 million of net sales.