OREANDA-NEWS. On 17 March 2008 was announced, that as part of LSR’s geographical expansion strategy, the Board of LSR Group approved a EUR 57 million deal to acquire 87% stake in the Betfor reinforced concrete company in Yekaterinburg. Betfor is to be included in the construction business segment of OJSC LSR Group. To control the reinforced concrete maker as well as the other land assets previously acquired in the region, LSR Group has decided to set up a new business unit, LSR-Urals.

LSR Group is buying the Betfor company from the NOVA-GROUP Urals-based holding company pursuant to an agreement with NOVA-GROUP on the acquisition of a series of building materials and real estate assets in Yekaterinburg. Currently, LSR Group is conducting due diligence of a number of other NOVA-GROUP assets with the prospect of potentially acquiring them but it has not committed itself to buy any yet and does not consider it appropriate to disclose any details of such acquisitions at the present stage.

Betfor Reinforced Concrete Factory is the largest prefabricated construction company in Yekaterinburg manufacturing prefab construction panels (with a capacity of 200,000 sq.m a year). In addition, the company has manufacturing facilities to turn out reinforced concrete products (120,000 cub.m a year), aerated concrete (120,000 cub.m a year), concrete and dry mixes (50,000 cub.m a year).

In 2007, Betfor’s market share of the panel construction segment in Yekaterinburg was 78.6%. Betfor has been No.1 prefab construction company for several years now.

The company is also one of the market leaders in building materials production. Thus, according to its own estimates, its share of the Yekaterinburg and Sverdlovsk Oblast market is 30.2% for aerated concrete, 37.4% for reinforced concrete products, and 5.1% for ready-mix concrete and mortar.

Betfor’s revenues for 2007 accounted for around 26% of the revenues and 32% of the EBITDA of LSR Group’s construction business segment over the same period.

By now, LSR Group has already acquired approximately 60 ha of land in Yekaterinburg and is planning to develop the plots building entirely new economy class residential neighbourhoods there. The acquisition of ZAO Betfor, the major player in the panel construction and building materials segments of the Yekaterinburg and Sverdlovsk Oblast market, will enable LSR Group to implement these projects in time and at high quality.

Igor Levit, the CEO and a member of the Board of Directors of OJSC LSR Group, has commented as follows:

“The acquisition of ZAO Betfor combined with the earlier purchased plots of land in Yekaterinburg will help LSR Group to implement its plans towards establishing real estate development, construction and building materials divisions in the Ural region to be managed by LSR-Urals Business Unit headquartered in Yekaterinburg. Thus, we are replicating our company’s unique business model in the market of Yekaterinburg and Sverdlovsk Oblast so strategically important for us. In addition, the new acquisition will materially expand the LSR’s construction segment and provide for a significant improvement of EBITDA in the segment.”

As of today, the investments of LSR Group to promote operations in the Ural region, including the acquisitions of land plots and Betfor, total approximately EUR 114 million (around USD 178 million) and fully comply with the statements of LSR Group regarding the use of proceeds obtained through the IPO the company implemented last autumn.

It may be noted, that the population of Yekaterinburg today is approx. 1.3 million people. By its volume of construction the region ranks fourth after Moscow (including the Moscow Oblast), St. Petersburg and Kazan. The construction market in Yekaterinburg has been rapidly growing over recent years: e.g. a total of 900,000 sq. m of housing were completed in 2007, nearly 170,000 sq. m (23% growth rate) more than in 2006 (732,700 sq. m). In 2006, the growth of housing construction compared to the 2005 volume (approx. 640,000 sq. m) was 14%.

According to the reports of DTZ, as of late 2007 the cost per sq.m of economy and business class residential property in the primary market was USD 2,150-2,500 while the average monthly wages were 16,000 roubles (by this indicator Yekaterinburg holds third place in Russia). In 2007, Standard & Poors assigned a BB rating to Yekaterinburg, with a stable outlook.