Amsterdam, 28 August 2008 - X5 Retail Group N.V., Russia's largest retailer in terms of sales, has announced that an agreement with the former shareholders of Formata B.V., the owner of the Karusel hypermarket chain, has been reached to resolve the outstanding post-completion issues on the recent acquisition.
On 27 June 2008 X5 announced that it had completed the acquisition of the entire issued share capital of Formata pursuant to the exercise of a Call Option Agreement dated 11 April 2006. The Company also announced that there were certain outstanding issues with the Former Shareholders, including real estate development contracts between Formata and the affiliates of Donson B.V. (which is associated with the Former Shareholders) (the “Donson Contracts”) and significant prepayments made under these contracts.
Since completion of the Share Purchase Agreement, X5 has been in constructive discussions with the Former Shareholders how best to resolve these issues. The agreement now reached is that it is in the best interest of all the Company’s shareholders to unwind the Donson Contracts and to refund all of the prepayments made under this contracts - in the amount of approximately RUR 3.9 billion (an equivalent of approximately USD 160 million) – to Formata.
After the termination, the parties will have no outstanding obligations under these contracts. Additionally, the Former Shareholders will pay to X5 approximately USD 40 million representing their compliance with post-completion obligations under the Call Option Agreement.
At the same time, on Friday, 22 August 2008, the Russian Federal Financial Markets Service (FFMS) has annulled previously registered issue of corporate ruble bonds by Hyperfinance LLC, a subsidiary of Donson, which initially was supposed to be guaranteed by Formata and its subsidiaries. Thus, any obligations of Formata or its subsidiaries with respect to Hyperfinance bonds have been effectively terminated.
Commenting on today’s announcement, Lev Khasis, the CEO of X5 Retail Group said: “This agreement in fact represents successful completion of two landmark M&A transactions in Russian retail – merger between Perekrestok and Pyaterochka and acquisition of Karusel by X5, which resulted in creation of a full-scale multi-format Russian retailer and an unrivalled leader in the sector”.
Andrei Rogachev, one of the former owners of Formata and existing shareholder in X5 Retail Group added: “We are happy that all the outstanding issues between X5’s shareholders have now been resolved. Remaining the largest minority shareholders in X5, we expect to benefit from the Company’s enlarged scale and strong exposure to hypermarkets.