OREANDA-NEWS. On 11 April 2008 was announced, that Amsterdam, 11 April 2008 - X5 Retail Group N.V. (the “Company”), Russia's largest food retailer in terms of sales (LSE ticker: “FIVE”), today announces that its Supervisory Board has approved the acquisition of 100% of the shares in Formata Holding B.V (“Formata”), owner of the Karusel hypermarket chain, subject to satisfactory due diligence on Karusel and receipt of the Federal Antimonopoly Service approval. Unless the context otherwise requires, references to Karusel in this press release are to Formata and its subsidiairies.

Strategic Rationale

The acquisition of the Karusel hypermarket chain will represent a significant milestone in the development of X5’s business and will enable the Company to:
• reinforce its position as Russia’s largest food retail operator in terms of revenue and significantly increase X5’s lead ahead of its closest competitors;
• immediately establish a leading position in the hypermarket format, the fastest growing food retail format in Russia;
• enhance the Company’s scale and efficiencies in the regions of its operations as Karusel’s stores are complementary to existing regional presence of X5;
• enhance X5’s asset base with high quality locations and real estate ownership; and
• extract significant synergies from the combination of the two businesses. Commenting on today’s announcement, Hervй Defforey, the Chairman of the Supervisory Board of X5 Retail Group said:

“The food retail sector in Russia continues its rapid growth, supported by strong macroeconomic fundamentals and booming consumer spending in Russia. X5’s business strategy is designed to capture this growth ahead of competition, and the acquisition of Karusel hypermarkets fits well into our strategy. This transaction will become a landmark deal in the sector, providing X5 with immediate scale and size in hypermarkets, the fastest growing segment of the market, and substantially widening the gap between the Company and its competitors, changing the landscape of the Russian food retail sector”.

Andrei Rogachev, the founder of Karusel, Member of the Supervisory Board of X5 Retail
Group and one of its largest shareholders added:

“I consider the acquisition of Karusel to be extremely beneficial for X5 and value-creative for its shareholders.”

At 31 December 2007 X5 and Karusel had 37* operational hypermarkets.

In terms of 2007 sales, the combined entity would rank as the number four hypermarket operator in Russia, with a 23.8% share in the top 10 food retailers plus Karusel and a 3.2% share in the total Russian food retail market**.

Transaction Highlights

The Group is expected to acquire 100% of the shares in Formata Holding B.V, owner of the Karusel hypermarket chain, for an estimated equity value in the range of USD 920 - USD 970 million depending on the valuation of Karusel land and real estate under construction.

The Company intends to settle up to 25% of the consideration for Karusel with newly issued Company shares, as allowed under the Call Option Agreement. The method of financing the remaining cash payment is being determined, with different forms of equity financing currently under consideration, including the possibility of granting existing GDR holders rights to subscribe for additional GDRs on a pro rata pre-emptive basis (subject to applicable legal requirements).

Transaction Milestones

X5’s Supervisory Board approved the transaction on the 10 April 2008, subject to satisfactory financial, legal and tax, and business due diligence, which is currently being conducted by X5. X5 expects FAS antimonopoly approval in April 2008.

The final equity value is expected to be determined at the end of April – early May following receipt of the real estate valuation report and determination of Sales and EBITDA figures in accordance with the Call Option Agreement.

The closing of the transaction is expected to take place on 1 July 2008.

Upon completion of the acquisition, X5 intends to integrate the existing Karusel stores into X5’s network and relaunch them under the Mercado Supercenter brand. We expect full support from the sellers, but in case of lack of cooperation on their side it may result in delays in the integration of the business and the incurrence of additional costs.

Karusel Overview

At the end of 2007, Karusel was the fourth largest hypermarket operator in Russia both by revenue and by selling area. According to publicly available data, its selling area stood at c.115 thousand square meters at 31 December 2007.

For the full year 2007, Karusel reported net sales of USD 831.1 million. Its EBITDA for the full year 2007 was USD 70.2 million and its net profit was USD 19.9 million.

Karusel owns and operates hypermarkets located in St. Petersburg and the North West of Russia, the Moscow region, Nizhny Novgorod, Dzerzhinsk, Volgograd and Izhevsk. There are currently 23 hypermarkets operating under the Karusel brand. Three more hypermarkets are under construction.

Synergy Benefits

The acquisition of Karusel is likely to provide the combined Group with significant synergy benefits from enhanced scale and operational integration.

Revenue synergies are likely to be generated through an improvement in the sales density of the existing Karusel stores. This is likely to be achieved as a result of several initiatives including rebranding of acquired stores, changing the merchandise assortment and improving the stores’ value proposition.

Gross profit is expected to benefit as a result of improved purchasing power, especially in the non-food category, as well as reduced logistic costs.

Cost synergies are likely to be achieved through a decrease in overheads and economies of scale. It is expected that the rebranded and integrated hypermarkets’ normalized performance will achieve sales densities and margins above Karusel’s historical levels in 2009.