REG - X5 Retail Group N.V - X5 notifies of claim by Russian Trade Ministry

X5 Retail NVAnnouncement

02/04/2024 07:00

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RNS Number : 8281I  X5 Retail Group N.V.  02 April 2024

 

X5 RETAIL GROUP N.V. ANNOUNCES NOTIFICATION OF A CLAIM BY THE RUSSIAN MINISTRY
OF INDUSTRY AND TRADE ON SUSPENSION OF RIGHTS IN ITS RUSSIAN SUBSIDIARY

Amsterdam, 29 March 2024 - X5 Retail Group N.V. ("X5" or the "Company", LSE
and MOEX ticker: FIVE), which operates the Pyaterochka, Perekrestok and
Chizhik retail chains, announces that the Ministry of Industry and Trade of
the Russian Federation has notified the Company on a claim with the Arbitrazh
Court of the Moscow Region (the "Court"), seeking a suspension of the
Company's corporate rights in its Russian subsidiary, X5 Corporate Centre LLC
(the "Subsidiary").

The Court proceedings will not impact the Company's day-to-day operations in
Russia, and its businesses continue to operate as usual. The Company's
Supervisory Board convened in an urgent meeting to discuss this development
after receiving notice of the claim.

Under the provisions of the Russian Federal Law No. 470-FZ dated 4 August 2024
(the "Law"), the Court must decide whether to accept the claim within one
business day from the date of its filing. If the Court accepts the claim, the
trial itself will take not less than five days and not more than one month
from the date of the claim's acceptance.

During the trial period, the Court may, at its discretion, adopt interim
measures that could restrict certain rights of the Company in respect to the
Subsidiary. These measures may include prohibitions on voting in the general
meeting of shareholders; disposing of its shares in the Subsidiary; or
receiving distributions from the Subsidiary's net profit.

The claim asks the Court to restrict the Company's shareholder rights with
respect to the Subsidiary, transfer the shares belonging to the Company into
treasuries, and further follow the procedure of the Law in requiring Russian
holders of the Company's depositary receipts (DRs) and ultimate owners to
accept a distribution of shares in the Subsidiary proportionate to their
participation in the Company, as well as granting a similar right to the
Company's non-Russian holders and beneficiaries. The claim further establishes
that the abovementioned rights and obligations will be granted to holders and
ultimate owners as of the date of the Court's decision. This means that X5 DRs
acquired after the date of the Court's decision would not result in the buyer
obtaining the rights to participate in the distribution of shares in the
Subsidiary. The Law also provides for a separate distribution procedure for X5
DR holders within Russian depositaries, in a process to be established by the
Central Bank of Russia, that would not require an application for
participation by X5 DR holders. However, the relevant act of the Central Bank
of Russia has not yet been issued.

If satisfied, the claim would result in the suspension of the Company's
shareholder rights with respect to the Subsidiary, and the subsequent
distribution of shares in the Subsidiary to the Company's DR holders and
ultimate owners. The Subsidiary would be reorganised into a public company
with a listing of its shares on the Moscow Exchange.

If the Court were to satisfy the claim, it would result in certain risks to
the Company's shareholders and beneficiaries, as described in X5's 2023 Annual
Report. Certain X5 GDR holders may not be able to participate in the
procedures offered by the Law or face significant difficulties in doing so.
Non-Russian shareholders who participate in the distribution of shares in the
Subsidiary would also be subject to temporary Russian restrictions relating to
transactions with securities and the receipt of dividends, placing both the
securities and any future dividends on so-called type-S accounts. While the
Law envisages a potential cash compensation at market value for the
non-distributed shares in the Subsidiary, the payment of such compensation
would require approvals pursuant to temporary Russian regulations on
cross-border financial transactions. Ultimately, DR holders who do not
participate in the distribution may end up not being able to recover their
investment, and the value, profitability and liquidity of their GDRs may be
adversely affected.

In light of the above developments, and following a discussion within the
Supervisory Board, to avoid a potential conflict of interests pursuant to the
upcoming Court proceedings and to maintain effective governance, the following
changes have been made to the corporate governance structures of the Company
and the Subsidiary:

•    X5 CEO Igor Shekhterman and X5 President Ekaterina Lobacheva are
stepping down from the Management Board of the Company with immediate effect.
They will continue their management duties with the Subsidiary, with a focus
on maintaining the development and stability of its Russian retail operations.

•    Leonid Afendikov, Dmitry Alekseev, Alexey Kornya, Yuliya Solovyova,
Azer Talybov and Vadim Zingman are stepping down as members of the Supervisory
Board of the Company, effective immediately. All six individuals will retain
their positions as members of the Board of Directors of the Subsidiary.

•    Peter Demchenkov, Olga Vysotskaya and Vassilis Stavrou are stepping
down as members of the Board of Directors of the Subsidiary, effective
immediately. They will retain their positions as Chairman and members,
respectively, of the Supervisory Board of the Company.

As a result of these changes, the Management Board and the Supervisory Board
of the Company will consist of two and three members, respectively. The Board
of Directors of the Subsidiary will consist of six members, including three
new members appointed on 27 March.

To further develop X5's corporate governance system, the Executive Board in
Russia, which previously consisted of nine individuals, is terminated. The
authorities of the Executive Board are now vested with Igor Shekhterman and
Ekaterina Lobacheva, overseen by the Board of Directors of the Subsidiary.

The Supervisory Board and Board of Directors of both the Netherlands-based
Company and its Russian Subsidiary will continue to provide active oversight
of the Company's operations and work to protect the interests of Company
shareholders.

The Management Board of the Company, with support from legal advisors, will
use all legal means available to protect its rights and interests as well as
those of its stakeholders, both during the upcoming Court proceedings and in
the subsequent period. Further updates on developments will follow when
appropriate. The Company remains committed to acting in the best interests of
X5 Group, its shareholders and other stakeholders.

 

X5 Retail Group N.V. (LSE and MOEX: FIVE; Expert RA - ruAAA; ACRA - AAA(RU))
is a leading Russian food retailer. The Company operates proximity stores
under the Pyaterochka brand, Perekrestok supermarkets and Chizhik hard
discounters. X5 provides an omnichannel experience to its customers,
integrating retail stores and e-commerce through its businesses Vprok.ru,
5Post and Mnogo Lososya.

As of 31 December 2023, X5 had 24,472 Company-operated stores. It has the
leading market position in both Moscow and St Petersburg and a significant
presence in the European part of Russia, as well as a growing presence in the
Russian Far East. Its store base includes 21,308 Pyaterochka proximity stores,
972 Perekrestok supermarkets, 1,500 Chizhik hard discounters and 610 Krasny
Yar and Slata stores. The Company operates 62 DCs and 5,344 Company-owned
trucks across the Russian Federation.

X5 is one of the largest employers in Russia. The Company employs over 372
thousand people.

For the full year 2023, revenue totalled RUB 3,145,859 million (USD 36,903
million*), EBITDA pre-IFRS 16 reached RUB 214,764 million (USD 2,519
million*), and net profit pre-IFRS 16 for the period amounted to RUB 90,284
million (USD 1,059 million*).

Forward-looking statements

This announcement includes statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the fact that they do not only relate to historical or current
events. Forward-looking statements often use words such as "anticipate",
"target", "expect", "estimate", "intend", "expected", "plan", "goal",
"believe", or other words of similar meaning.

By their nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances, a number of which are
beyond X5 Group N.V.'s control. As a result, actual future results may differ
materially from the plans, goals and expectations set out in these
forward-looking statements.

Any forward-looking statements made by or on behalf of X5 Group N.V. speak
only as of the date of this announcement. Save as required by any applicable
laws or regulations, X5 Group N.V. undertakes no obligation publicly to
release the results of any revisions to any forward-looking statements in this
document that may occur due to any change in its expectations or to reflect
events or circumstances after the date of this document.

* FX rate: 85.2466 USD/RUB

 

 For further details please contact:
 Polina Ugryumova                                                 Maria Yazeva
 Head of Corporate Finance and IR                                 Investor Relations Officer

Tel.: +7 (495) 662-88-88 ext. 13-312
Tel.: +7 (495) 662-88-88 ext. 13-147

e-mail: Polina.Ugryumova@x5.ru (mailto:Polina.Ugryumova@x5.ru)
e-mail: Maria.Yazeva@x5.ru (mailto:Maria.Yazeva@x5.ru)

 

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