25th Nov 2009 07:06
X5 TO ACQUIRE PATERSON Supermarket CHAIN
Amsterdam, 25 November 2009 - X5 Retail Group N.V., Russia's largest retailer in terms of sales (LSE ticker: "FIVE"), today announced that following the approval of its Supervisory Board, it has signed an agreement to acquire 100% of the business and assets of Paterson supermarket chain ("Paterson") from a holding company CorpInvest Inc. Regulatory approval for the transaction was received on 27 October 2009 when the Russian Federal Anti-Monopoly Service granted its unconditional consent. X5 expects to complete the transaction by mid-December 2009.
Paterson is a non-public supermarket chain of 82 stores located in Moscow, the Moscow region, St. Petersburg, Kazan and other cities of European Russia and Urals. Net selling space totals approximately 65 thousand sq.m., while total space amounts to 145 thousand sq.m., approximately 20% of which is owned.
The transaction will be structured as a 100% payment in cash for equity and full assumption of Paterson's debt. In accordance with the agreement, equity value totals USD 189.5 million. Paterson's net debt stands at approximately USD 85 million. X5 plans to finance this purchase from its operating cash flows.
Lev Khasis, X5 Retail Group CEO, commented:
"The acquisition reinforces X5's number one position in supermarkets and adds high quality locations in key geographic markets with strong demographics for this format. We see substantial scope for raising sales density and profit margins of the acquired stores by rebranding and realigning the value proposition and leveraging X5's operational scale, distribution infrastructure and efficiency programs. This is an excellent strategic and operational fit for X5 and offers attractive value for our shareholders."
Business Rationale
Strategic Fit
Reinforces X5's number one position in supermarkets. The acquisition of Paterson will strengthen X5's positions in supermarket format by securing high quality locations in strategically important regions, including Moscow and St. Petersburg. X5 expects that the acquisition of Paterson will increase its supermarket store count by approximately 25%.
Operational Fit
Smooth integration. As most Paterson stores are highly compatible with X5's format and geographic requirements, X5 expects a smooth and rapid integration process. Based on preliminary estimates, X5 plans to integrate 52 Paterson stores as supermarkets under the Pererkrestok brand, and 30 smaller stores as soft discounters under the Pyaterochka brand. A few stores are under review with regard to X5's financial criteria. While X5 will need to close Paterson stores temporarily for rebranding and IT systems upgrades, it expects to finalize the integration by mid-2010.
Benefits of X5's operational scale, distribution infrastructure and efficiency programs.
Virtually all of Paterson stores are accessible by X5's distribution network, which will enable an increase in Paterson's supply centralization level from the current 0% to over 50% after the stores are integrated. This, combined with the integration and centralization of other vital functions, including purchasing, IT and HR, should enable significant improvement in Paterson's financial performance.
Financial Upside
Improvements in sales density, EBITDA margin and positive cash flow generation.
X5 sees significant scope for raising sales per square meter at the acquired stores from the current level of RUR 185,000 per annum on average (including VAT). X5 also plans to drive improved profitability through integration and efficiency programs. While X5 will invest gross margin into customer loyalty in order to retain customers and support the rebranding of Paterson stores, it expects that synergy gains will already drive improved EBITDA margin contributions in the second half 2010. Altogether, the deal is expected to strengthen X5's cash flows thanks to the healthy cash generating capacity of supermarkets and expected synergies from the integration. X5 expects total annualized synergies to positively impact X5's operating cash flow by approximately USD 50 million annually starting from 2011.
Paterson Overview
Paterson is a non-public supermarket chain of 82 stores located in Moscow, the Moscow region, St. Petersburg, Kazan and other cities of European Russia and Urals. Net selling space totals approximately 65 thousand sq.m., while total space amounts to 145 thousand sq.m., approximately 20% of which is owned. In addition to 82 stores in operation, Paterson has a pipeline of four committed stores with preliminary signed lease agreements and one land plot with a long-term lease. 18 additional stores operate under the Paterson brand in Siberia pursuant to franchising agreements (revenues from these stores are not consolidated by the company). Paterson does not have any logistics infrastructure. The company's headcount totals approximately 3,800 employees, of which 90% are store personnel and 10% work in the company's headquarters.
Paterson's net sales for the 12 months to 30 September 2009 totaled RUR 10,968 million. Its EBITDA for the 12 months to 30 September 2009 totaled RUR 815 million for an EBITDA margin of 7.4%*. Paterson's net debt stands at approximately RUR 2.5 billion (approximately USD 85 million).
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For further details please contact |
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Anna Kareva IR Director Tel.: +7 (495) 980-2729, ext. 22 216 e-mail: [email protected] |
Maxim Trapeznikov Head of PR Department Tel.: +7 (495) 662-8888, ext. 31 262 e-mail: [email protected] |
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* Based on Paterson's management accounts and RGAAP financial statements and adjusted in line with X5's reporting policy
Note to Editors:
X5 Retail Group N.V. is Russia's largest 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. In June 2008, X5 acquired Karusel hypermarket chain and substantially strengthened its position in hypermarket format.
As at 30 September 2009, X5 had 1,217 Company-managed stores located in Moscow, St. Petersburg and other regions of European Russia, Urals and Ukraine, including 952 soft discount stores, 210 supermarkets and 55 hypermarkets. As at 30 September 2009, X5's franchisees operated 586 stores across Russia.
For the full year 2008, X5's net sales including acquired Karusel business on a pro-forma basis totaled USD 8,892 mln, EBITDA reached USD 803 mln, and net profit adjusted for non-cash goodwill impairment charge amounted to USD 112 mln.
For the first half 2009 X5's net sales totaled USD 3,978 mln, EBITDA reached USD 347 mln, and net profit amounted to USD 48 mln. For the nine months 2009, net retail sales totaled USD 6,053 mln.
X5 Shareholder structure is as follows: Alfa Group - 47.9%, founders of Pyaterochka - 23.1%, X5 Management - 1.9%, treasury shares - 0.1%, free float - 27.0%.
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.
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