OREANDA-NEWS. December 16, 2010. X5 Retail Group N.V. (“X5”), Russia's largest retailer in terms of sales (LSE ticker: “FIVE”), announced that it has signed an agreement to acquire Kopeyka retail chain (“Kopeyka”) in a transaction with a total enterprise value of RUR 51.5 billion including assumption of debt.

Kopeyka is the number three soft discounter in the Russian food retail market in terms of revenue and number of stores. As of the signing date, Kopeyka operates more than 660 stores with total selling area over 290 000 sq.m. It is expected that by the end of 2010 Kopeyka will have rights for approximately 700 stores.

Kopeyka reported net revenues of RUR 59.3 billion and EBITDA of RUR 3.8 billion for the 12 month period ending June 30, 2010, according to financial statements reviewed by auditors.

Kopeyka operates soft discounter stores in the European part of Russia, with more than 50% of its business in Moscow and Moscow region.

As a result of the transaction, X5 will reinforce its number one position in the Russian retail market with a substantial increase in scale:

-           Leadership in discounters, adding ~ 700 stores;

-           Expanded discounter presence in Moscow and Moscow region (75% increase in number of stores based on June 30, 2010);

-           Total combined selling area of 1 400 ths. sq. m at June 30, 2010 (25% increase over X5 stand-alone);

-           Pro forma combined retail turnover of RUR 360 billion for the 12 months to June 30, 2010 (20% increase);

-           Pro-forma combined EBITDA of RUR 27.7 billion for the 12 months to June 30, 2010 (16% increase).

The transaction was approved by the Russian Federal Anti-Monopoly Service (FAS). It is expected that the transaction will close in the second half of December 2010.

Further information on Kopeyka is provided in this press release and in X5's presentation to investors on the Company's website.

Lev Khasis, CEO of X5 Retail Group, said:

"X5's multi-format growth has been led by soft discounters' success in winning customers and delivering industry-beating like-for-like sales performance. Acquiring Kopeyka reinforces X5's number one position in the Russian retail market, significantly expanding our soft discounter presence in Moscow and Moscow region.

Kopeyka is a strong retail operator with good store locations, infrastructure and qualified personnel. We have identified significant opportunities for growing sales densities of acquired stores and improving efficiency to support margins. Economies of scale and integration of the Kopeyka asset base will further increase X5's operating leverage in purchasing, distribution and other areas. With strong management at different levels and advanced infrastructure and technologies, Kopeyka also contributes expertise and capacity to support X5's growth.

Finally, the acquisition of Kopeyka will enable X5 to deliver even better value for Russian consumers. We will provide the lowest prices on the market for an increased number of lower income customers, while upgrading assortment in fresh produce and other items and stepping up expansion of discounters to reach more consumers underserved by the competition."

Andrei Gusev, X5's M&A and Business Development Director, added:

"Kopeyka team, to their credit, have built a great business and we are delighted they have chosen X5 as a partner. This is an attractive deal that meets our financial objectives is supposed to generate significant value for X5's shareholders. Synergies will ramp up as we integrate Kopeyka over the next two years, and the acquisition will be substantially accretive afterwards. The quality of Kopeyka's assets was underlined by serious interest from international players, while transaction valuation is in line with recent IPO activity in the Russian retail sector."