X5 SIGNS AGREEMENT TO COMPLETE ACQUISITION
OF KARUSEL HYPERMARKET CHAIN
Amsterdam, 25 June 2008 - X5 Retail Group N.V. (“X5” or the “Company”), Russia's largest food retailer in terms of sales (LSE ticker: “FIVE”), announces today that it has signed an agreement with the shareholders of Formata Holding B.V. (“Formata”) (the "Grantors"), the owner of the Karusel hypermarket chain (“Karusel”), for the acquisition of the entire issued share capital in Formata and related intellectual property for a total amount of approximately USD 940 million, including an in-kind payment of 6,986,020 X5 GDRs at a provisional value of USD 33.10 per GDR. The acquisition of Formata is expected to complete before 28 June 2008.
X5 and the shareholders of Formata have today signed a share purchase agreement that provides for the transfer of the entire issued share capital in Formata before 28 June 2008. The purchase price payable by X5 was calculated in accordance with a formula set out in the Call Option Agreement (please see X5 press-release dated 16 January 2008, attached hereto for your convenience) and amounts to approximately USD 925 million, which includes:
· the value of Karusel's operational business as at 31 December 2007 in the amount of USD 914 million;
· its land and other real estate in the course of construction (where business was not carried out as at 31 December 2007) in the amount of USD 148 million, as determined by an internationally recognized independent real estate appraiser;
· less its net debt as at 31 December 2007 in the amount of USD 137 million.
The land and other real estate under construction include a hypermarket that was opened in the first half of 2008, three hypermarkets under construction, and eight land plots potentially suitable for hypermarket construction.
In accordance with the terms of the Call Option Agreement, X5 has elected to settle 25% of the purchase price with newly issued X5 shares (which are expected to be converted into GDR form), at a provisional value of USD 33.10 per GDR. For this purpose, in line with authorization by shareholders at the EGM held on 21 April 2008, the Supervisory Board has approved the issuance of 1,746,505 new shares (equivalent to 6,986,020 GDRs) and the exclusion of pre-emptive rights with respect to this issuance. The provisional GDR price is calculated in accordance with the Call Option Agreement, based on the average weighted price for 30 days preceding the exercise date (2 January 2008). The final GDR price is subject to confirmation by London Stock Exchange within 30 days after the signing. The balance of the purchase price will be paid in cash.
X5 has also entered into an additional agreement with Andrei Rogachev, one of the beneficial owners of Formata, and a company controlled by him to acquire certain intellectual property for use in Karusel’s business (including Karusel’s business platform, brands, patents, licenses, IT and other relevant documentation) for a consideration of USD 15 million payable after the completion of the transaction.
At signing, the Grantors have disclosed that Formata has entered into real estate development contracts with affiliates of Donson B.V. (“Donson”) (which is associated with the Grantors) to build eight additional hypermarkets. In connection with these contracts, Formata has made some significant prepayments to Donson. As a part of their contractual obligations, the Grantors warranted that there are no other material contracts or obligations of Formata in favour of persons connected with the Grantors. The Grantors have also warranted that total gross debt outstanding at closing will not exceed RUR 10.3 billion (approx. USD 436 million). The Company has been aware of certain of these matters in the course of the earlier negotiations (as it became disclosed in the Karusel’s financial statements for 2007). The Company has indicated to the Grantors its position that such contracts and commitments do not accord with Grantors' obligations under the Call Option Agreement. The Company is considering how best to resolve this outstanding issue.
Goldman Sachs is acting as financial advisor, Lovells – as legal advisor to X5 Retail Group on the acquisition of Formata.
ATTACHMENT I:
X5 Press-release dated 16 January 2008
Note to Editors:
X5 Retail Group
X5 Retail Group N.V. is Russia's largest food retailer in terms of sales. The Company was created as a result of a merger between Pyaterochka(soft discounter chain) and Perekrestok (supermarket chain) on 18 May 2006.
As of 31 March 2008, X5 had 731 Company managed soft discount stores located in Moscow (321), St. Petersburg (249) and other Russian areas (161), 183 Company managed supermarkets across Central Russia and Ukraine, including 108 stores in Moscow (Moscow region and Yaroslavl region), and 16 Company managed hypermarkets.
As of 31 March 2008, X5’s franchisees operated 711 stores across Russia and Kazakhstan.
X5’s net sales for the full year 2007 reached USD 5,320 mln, an increase of 53% year-on-year. Gross profit for the period totaled USD 1,404 mln, EBITDA amounted to USD 479 mln. Full year 2007 net income reached USD 144 mln.
X5 Retail Group N.V.’s net sales for the first quarter 2008 surged 61% in USD terms and reached USD 1,786 mln. Gross profit for the period totaled USD 458 mln, EBITDA amounted to USD 161 mln, net profit – to USD 86 mln.
Formata Holding B.V.
Formata Holding B.V. is the owner of Karusel hypermarket chain (“Karusel”)
At the end of 2007, Karusel was the fifth largest hypermarket operator in Russia by revenue. According to publicly available data, its selling area stood at c.115 thousand square meters at 31 December 2007.
For the full year 2007, Karusel reported net sales of USD 831.1 million. Its EBITDA for the full year 2007 was USD 70.2 million and its net profit was USD 19.9 million.
Karusel owns and operates hypermarkets located in St. Petersburg and the North West of Russia, the Moscow region, Nizhny Novgorod, Dzerzhinsk, Volgograd and Izhevsk. There are currently 23 hypermarkets operating under the Karusel brand. Three more hypermarkets are are under construction, and the Company owns eight land plots potentially suitable for hypermarkets construction.
For further details please contactAnna Kareva
IR Director
Tel.: +7 (495) 980-2729, ext. 22 162
e-mail: / Elena Cherkalova
PR Manager
Тел.: +7 (495) 950-5577
e-mail:
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 X5 Retail Group 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 X5 Retail Group N.V. speak only as at the date of this announcement. Save as required by any applicable laws or regulations, X5 Retail Group 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.
Attachment I
X5 RETAIL GROUP N.V. STARTS DUE DILIGENCE ON KARUSEL
ADVISED BY GOLDMAN SACHS
Amsterdam, 16 January 2008 - X5 Retail Group N.V., Russia's largest food retailer in terms of sales (LSE ticker: “FIVE”), announced today that it has sent an Option Notice (the Notice) to the shareholders of Formata Holding B.V. (Formata) on execution of its rights under a Call Option Agreement with respect to the purchase of 100% of the shares of Formata (the Option Shares). Formata owns the Karusel hypermarket chain. The Notice is irrevocable. Nevertheless, the acquisition of the Option Shares is conditional upon the completion by X5 Retail Group to its satisfaction of due diligence on Formata and on receipt by X5 Retail Group of any required regulatory, shareholder or third party approvals.
Following receipt of the Notice by Formata’s shareholders, X5 Retail Group has begun carrying out due diligence on Formata’s legal, tax, financial, business, real estate standing, etc. Under the Call Option Agreement, Formata must provide all reasonable assistance to X5 Retail Group in conducting the due diligence.
Completion of the Call Option, assuming the above conditions are fulfilled, must take place by the later of (i) 1 July 2008 or (ii) three months after the provision to X5 Retail Group of the audited consolidated IFRS accounts for Formata for the year ended 31 December 2007.
The amount payable by X5 Retail Group for the exercise of the Call Option is the aggregate of:
(a) the lesser of:
(i) 1.1 multiplied by consolidated net sales of Formata; or
(ii) 14.5 multiplied by the greater of
i. EBITDA; or
ii. 5% of consolidated net sales of Formata; plus
(b) the value of the land and other real estate in the course of construction (where business is not carried out as at 31 December 2007), as determined by an independent real estate valuer; less
(c) the aggregate amount of Formata’s net debt,
in each case calculated by reference to Formata's audited consolidated IFRS accounts for the year ended 31 December 2007.
No less than 75% of the Option Price is payable in cash, while the remaining amount can be settled by newly issued X5 Retail Group shares. The financing structure of the deal will be announced subject to X5’s satisfaction with the due diligence results.
X5 Retail Group has mandated Goldman Sachs to act as its financial advisor on the potential acquisition of Formata.