X5 Retail Group, Russia's largest food retailer, has said it will exercise its option to buy into Formata, which owns the Karusel hypermarket chain. However, the acquisition of shares will depend on X5 Retail Group's satisfactory due diligence report on Formata, as well as on the retailer receiving all the required approvals from regulators, shareholders, and third parties, according to a statement issued by the retailer.

"The potential purchase of Karusel would give X5 an immediate, significant exposure to the hypermarket segment, which has huge growth potential in the Russian retail market," Andrei Gusev, X5's director for mergers and acquisitions, told the Moscow Times.

The X5 Retail Group N.V, with a market value of US$6.4 billion, was created in May 2006 when the Pyaterochka chain of soft discounters merged with Perekrestok. Perekrestok operates three formats: convenience stores (with an average trading area of 400 to 600 square meters and 7,500 SKUs), supermarkets (800 to 1,600 square meters with 20,000 SKUs) and city hypermarkets. As of 30 September 2007, the group had 749 stores company-managed stores and 627 franchisee operated stores across Russia and Kazakhstan.

Since its inception X5 has bought out a number of retail chains. Last year it acquired smaller grocery chain Korzinka for US$115 million with 22 stores in the Lipetsk region. Last month, it signed an agreement to acquire 29 discounter stores under the Strana Gerkulesia (“Land of Hercules”) brand.

The policy to accelerate growth continues. X5 Retail Group's results published today show that in 2007 net retail sales surged 53% year-on-year to US$5,284 mln.

"This year we plan to accelerate gaining exposure to the hypermarket format by opening six compact and two large size hypermarkets. As a result, we expect to deliver a net sales increase in the range of 36-38 per cent, exluding currency effect in 2008,” said Lev Khasis, X5 Retail Group CEO.