X5 Retail Group N.V. Completes Buy-Out of Pyaterochka Franchisee in Urals
02 Jul 2009
Amsterdam, 2 July 2009 - X5 Retail Group N.V. (“X5” or the “Company”), Russia's largest retailer in terms of sales (LSE ticker: “FIVE”), announces that it has completed its buy-out of the company that operates Pyaterochka stores in Yekaterinburg and Chelyabinsk.
X5 has been consolidating its control over Pyaterochka's operations in Yekaterinburg and Chelyabinsk since April 2007 when it set up a joint venture with its franchisee to manage Pyaterochka stores in both cities. In accordance with the agreement, X5 has now purchased the remaining 25 percent interest, which gives X5 full ownership of the business. The price of the 25% stake was determined on the basis of the Urals-based company's 2008 sales performance and totaled RUR 576 million (approx. US $18 million). This transaction gives X5 full control of the leading discounter chain in the major Urals region cities of Yekaterinburg and Chelyabinsk, with 2008 net retail revenue of RUR 6.8 billion (US $272 million). It currently operates 103 Pyaterochka stores (appr. 37 thousand sq.m. of net selling space).
X5 Retail Group CEO Lev Khasis commented: "In the two years since X5 has been managing Pyaterochka business in Yekatarinburg and Chelyabinsk, we have almost tripled selling space, secured leading positions in both regional cities, substantially increased sales per square meter in LFL stores and enhanced profitability. This is a prime example of our successful development of franchisee relationships to the benefit of both X5’s shareholders and partners".
For reference: In April 2007 X5 entered into an agreement with its Chelyabinsk franchisee to set up a joint business that consolidated all Pyaterochka stores in Yekaterinburg and Chelyabinsk - 40 stores (approx. 14 thousand meters of selling space) at that time. X5's initial stake in the joint company totaled 51%, while the agreement provided for a two-stage buy-out of the remaining 49% by X5 over the following two years. In June 2008 X5 acquired an additional 24% interest. The purchase of the remaining 25% announced today completes the buy-out process and brings X5's ownership to 100%.
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