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. Last Updated: 07/27/2016

X5, Jackpot in Stores Deal

X5 Retail Group, the country's largest food retail company, has signed a nonbinding agreement with the Jackpot casino chain to create a convenience store franchise in Moscow and St. Petersburg by early next year, X5 said in a statement Monday.

X5 will hold a 40 percent stake in the venture, the statement said. Under the agreement, X5 reserves the right to acquire an additional 30 percent stake in 2011 and a further 30 percent share in 2013, the statement said.

Brady Martin, an expert in retail markets at Alfa Bank, said X5's plans for a small store format were similar to a model that has proven successful in the United States, France and Britain.

"There is still a lot of opportunity in this sector. The existing mom-and-pop shops are not a particularly competitive format, so a larger retailer will benefit from an economy of scale, competitive pricing and brand recognition," Martin said. "This is a low-risk, low-cost way for [X5] to expand."

Jackpot's expansion into the retail sector is part of a wider trend as gambling operators seek new business models after President Vladimir Putin approved a law in December restricting gambling to four specially designated zones around the country beginning in July 2009.