X5 to Buy Hercules for $65M

The country's leading food retailer, X5 Retail Group, said Friday that it had signed an agreement to acquire the Strana Gerkulesia, or The Land of Hercules, discounter chain for $65 million including debt.

X5, controlled by billionaire Mikhail Fridman's Alfa Group, said in a statement that it would buy 29 discounter stores, of which 26 are operational and three are scheduled for opening in the first quarter of 2008.

X5 plans to close the deal by the end of 2007.

"The stores of Strana Gerkulesia organically enhance and expand our existing chain of soft discounters and establish X5's presence in new cities and towns of the Moscow region," X5 chief executive Lev Khasis said.

X5, created in 2006 through a merger of discounter Pyatyorochka and supermarket chain Perekryostok, had 749 stores as of Sept. 30.

Andrei Gusev, X5's director for mergers, acquisitions and business development, said the acquisition could create significant synergies as the acquired chain's stores operate in the regions where X5 has a strong presence.

Strana Gerkulesia operates in Moscow and Tver regions, and has a total net selling space of 12,900 square meters.

X5 said the total purchased area of 27,100 square meters also included an office building and construction in progress that could be converted into selling space in the future.