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Pyaterochka Holding N.V. announces the acquisition of a retail chain and a distribution center in Moscow

October 13, 2006. TAG: Retail Trade

Amsterdam, 13 October 2006 - Pyaterochka Holding N.V., Russia’s leading grocery retailer, today signed a binding agreement to acquire 100% of OOO “Metronom AG”. The enterprise value of the transaction is US$ 200 mln payable in cash and through assumption of debt.  

As a result, Pyaterochka Holding N.V. will acquire a business owning retail premises of approximately 33,000 square metres valued over US$ 115 mln in commercially attractive districts of the city of Moscow, as well as a wholly-owned distribution and office centre in the central part of Moscow with total capacity of more than 17,000 square metres valued approximately US$ 35 mln, with a land plot of 4.3 hectares with a possibility of its use for additional purposes.

Through this acquisition, Pyaterochka Holding N.V. will also acquire an established and growing operational business of 16 supermarkets in the city of Moscow, 7 of which are owned and 9 of which are operated under long-term lease agreements. The OOO “Metronom AG” has the rights for the retail operations in the Russian Federation under own “Merkado” and “Merkadona” trademarks.

 The total space of these stores is approximately 50,000 square metres, of which net trade space is approximately 14,000 square metres, with another 14,000 square metres subleased to non-food retail operators.  According to company estimates, in 2007 net retail sales of these stores will total no less than $110 mln (net of VAT).  Assuming that the operational business rent all of its retail premises at market rates, it anticipates to generate EBITDA no less than at a level of the average EBITDA margin for the Pyaterochka Group. 

The total transaction enterprise value of the operational business (excluding the value of real estate) is approximately US$ 50 mln. 

According to the terms of the agreement the transaction is subject to the approval of the Supervisory Board of Pyaterochka Holding N.V. and statuary government approvals, including antimonopoly authorities.  The transaction is expected to close before the end of the year.

Lev Khasis, Group Chief Executive Officer, commented on the signing of the acquisition agreement,

“After the closing of the transaction, the acquisition of the “Merkado” assets will significantly enhance our already leading position in the most important market of Russia - the city of Moscow.   The supermarkets are located in attractive locations with a strong existing customer base and can be easily integrated into the Group’s existing formats. The distribution and office centre near the city centre is a valuable addition to our real estate portfolio and is also expected to be used as the corporate office of the Group, allowing us to consolidate numerous leased office locations around the city which will certainly save our rental costs as well as improve management and communication.”    

Andrei Gusev, Group Director for Mergers, Acquisitions and Business Development, added,

“This transaction clearly reflects the increased number of opportunities and potential acquisition targets which we now enjoy as a combined entity, following the merger of Pyaterochka and Perekrestok this spring.”

 

Note to Editors:

Pyaterochka Holding N.V. is Russia's largest food retailer in terms of sales.  As of 30 September 2006, the group had 420 company-managed "Pyaterochka" soft discount stores located in the Moscow (199), St. Petersburg (199) and Yekaterinburg (22) areas, and 141  company-managed "Perekrestok" supermarkets across Central Russia and Ukraine, including 81 stores in Moscow.

As of 30 September 2006, franchisees operated 539 Pyaterochka branded stores across Russia, in Ukraine and Kazakhstan.  Perekrestok has 10 convenience stores operated by franchisees in the Moscow area.  

Pyaterochka and Perekrestok have merged their operations as of 18 May 2006 to create the clear leader in the Russian food retail market.  

Pyaterochka’s 2005 net sales (pre-merger) reached USD 1,359 million, with gross banner sales in 2005 of over USD 2 billion.  Perekrestok net sales reached USD 1,015 million in 2005. 

The Group’s pro forma (assuming both chains contribution from 1 January 2006) net sales for the first half of 2006 were US $1,581 million (management accounts). During 1H 2006, the Pyaterochka chain provided US $906 million of net sales, while the Perekrestok chain contributed US $675 million of net sales.



Forward looking statements:

This announcement includes statements that are, or may be deemed to be, “forward-looking statements”.  These forward-looking statements can be identified by the fact that they do not only relate to historical or current events.  Forward-looking statements often use words such as” anticipate”, “target”, “expect”, “estimate”, “intend”, “expected”, “plan”, “goal” believe”, or other words of similar meaning.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond Pyaterochka Holding N.V.'s control.  As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements.

 

Any forward-looking statements made by or on behalf of Pyaterochka Holding N.V. speak only as at the date of this announcement.  Save as required by any applicable laws or regulations, Pyaterochka Holding N.V. undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document.

X5 Retail Group

X5 Retail Group is the leading food retailer in Russia. X5 shares are listed on London Stock Echange (LSE) in the form of Global Depositary Receipts. The Company operates several retail formats, including the chain of conveniently located proximity stores under the Pyaterochka brand, the supermarket chain under the Perekrestok brand, the hypermarket chain under the Karusel brand and Express convenience stores.