X5 Retail Group has announced an agreement to acquire Kopeyka.

X5 Retail Group has announced an agreement to acquire Kopeyka.

Russia-based X5 Retail Group announced plans today (6 December) to acquire soft discount operator Kopeyka.

Moscow-based Kopeyka, which over 660 soft discount stores in the European part of Russia, will be sold in a transaction worth RUB51.5bn (US$1.6bn), and debt not worth more than RUB16.5bn.

X5 said the deal will reinforce its number one position in the Russian retail market, with a substantial increase in scale.

Kopeyka has long been touted as a potential target for Russia's largest domestic retailers and multinationals wanting to enter or expand in the country. Wal-Mart, for one, had repeatedly been linked to the business.

X5 has been said to have been interested in a move for Kopeyka for almost two years. The speculation intensified this summer and, in July, X5 made a submission to the country's anti-trust watchdog to buy Kopeyka.

In September, the Russian Federal Anti-Monopoly Service (FAS) said X5 would have to sell 24-27 stores if it wanted to proceed with its plans to buy Kopeyka.

Under the terms of the deal announced today, X5 said Kopeyka would "terminate trading" at 27 of its stores.

X5 runs the Pyaterochka chain and said it would convert the Kopeyka stores to the Pyaterochka banner over a two-year period. The Kopeyka chain recorded net revenue of RUB59.3bn and EBITDA of RUB3.8bn for the 12 months ended 30 June.

"We have identified significant opportunities for growing sales densities of acquired stores and improving efficiency to support margins," said X5 CEO Lev Khasis said. "Economies of scale and integration of the Kopeyka asset base will further increase X5's operating leverage in purchasing, distribution and other areas. With strong management at different levels and advanced infrastructure and technologies, Kopeyka also contributes expertise and capacity to support X5's growth."

The transaction is expected to close in the second half of the month.