X5 Retail Group N.V. Signs an Agreement to Acquire Strana Gerkulesia Retail Chain in Moscow Region
14 Dec 2007
Amsterdam, 14 December 2007 - X5 Retail Group N.V., Russia's largest food retailer in terms of sales (LSE ticker: “FIVE”), announced today that it has signed an agreement to acquire 100% of the business and assets of the Strana Gerkulesia (“Land of Hercules”) retail chain operating in the City of Moscow and the Moscow and Tver regions, for a total consideration of USD $65 million, including debt. The Company plans to close the deal by the end of 2007.
X5 Group will acquire a total of 29 discounter stores, of which 26 are operational and three are scheduled for opening in Q1 2008. Five stores are located in Moscow, 16 stores operate close to Moscow and eight stores are located in other areas of the Moscow region and in Tver.
The total purchased area is 27.1 thousand sq.m, which also includes an office building and construction in progress that potentially can be converted into selling space in the future. Over 11 thousand sq. m. are owned, whilst the average outstanding length of lease agreements for the remaining space is over 5 years.
The total net selling space of the Strana Gerkulesia stores is 12.9 thousand sq.m., of which 1.2 thousand sq.m. represent the outlets to be opened in Q1 2008.
Lev Khasis, X5 Retail Group CEO, commented:
“This transaction is an important step towards further strengthening our leadership in Moscow and its neighbouring areas. The stores of Strana Gerkulesia organically enhance and expand our existing chain of soft discounters and establish X5’s presence in new cities and towns of the Moscow region.”
Andrei Gusev, Mergers, Acquisitions and Business Development Director at X5 Retail Group added:
“As Strana Gerkulesia stores operate in the region where X5 historically has a very strong presence we expect that their integration into our soft discounter chain will result in significant synergies. Re-branding, changes in assortment and introduction of X5’s pricing policy will enable us to increase the sales per square meter of the new stores to reach Pyaterochka’s average level. Moreover, we expect that revised purchasing terms, improved logistics and substantial reduction in administrative expenses will bring the acquired stores’ operational efficiency to the levels that we enjoy in Moscow and the Moscow region already in the second half of 2008”.
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