OREANDA-NEWS. X5 Retail Group N.V., Russia's largest food retailer in terms of sales (LSE ticker: “FIVE”), announced today that it signed an agreement to acquire 100% of the business and assets of the Korzinka retail chain (Russian equivalent of the “Basket”), for a total consideration of US$115 million, including debt.

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 38,007sq.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, the ex-Head of X5 operations in discounter format in the Moscow 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 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 the normal regulatory approvals, including approval by the Federal Antimonopoly Service (FAS), and is expected to be closed by the end of 2007.