OREANDA-NEWS. October 19, 2009. Russia’s Federal Antimonopoly Service (FAS) is likely to approve X5's request to acquire 80 Paterson supermarkets, but only if the retailer agrees to sell 11 Paterson stores - as soon as it completes the deal - to keep its share of the St Petersburg market at 35%, Kommersant wires. In order to comply with this condition, X5 may sell 11 of its already existing St. Petersburg-based stores. The FAS is expected to make its decision by 4 November, reported the press-centre of OTKRITIE FC.      

View: We view this news as neutral for X5 stocks at the moment. We believe the acquisition of Paterson by X5 makes sense from a strategic standpoint since it will improve X5’s position in the supermarket format once the economy recovers.

Valuation & action: X5 trades at a 2009E EV/EBITDA of 12.0x, that is, at par with EM peers. We reiterate our BUY rating for the stock.