UPDATE 1-Russian retailer X5 selling stores in Ukraine amid crisis

Wed Mar 19, 2014 5:31am EDT

(Changes source, adds details, analyst comment, share price)

MOSCOW, March 19 (Reuters) - Russian food retailer X5 is selling its stores in Ukraine to local rival Varus, the Ukrainian retailer said, the first Russian company to pull out of its neighbour amid a bitter political crisis.

Ukraine is a favourite destination for Russian business, but Moscow's annexation of the southern Crimea region has split the neighbours, with some Ukrainian politicians calling for a boycott of Russian goods.

X5, Russia's second-biggest retailer and part of billionaire Mikhail Fridman's Alfa Group, is selling its Ukrainian stores to local privately owned supermarket chain Varus, a spokeswoman for the Ukrainian company said on Wednesday.

She gave no details, but Ukrainian newspaper Capital reported earlier that the deal could be worth around $5-10 million. It had been in the works since October, but the crisis over Crimea may have quickened the pace of talks.

X5 declined to comment.

"We link the decision to the current political situation," analysts at VTB Capital said, adding that Ukraine was a minor contributor to the company's results.

Russian President Vladimir Putin signed a treaty on Tuesday on making Crimea a part of Russia, defying the United States and the European Union which have imposed sanctions on a handful of Russian officials.

According to X5, its Ukrainian business unit's contribution to the group's financial results is negligible. The company said in a 2013 financial report that it had 12 stores in Ukraine out of total of 4,544 mostly across Russia.

Varus is buying the lease rights to X5's Perekryostok supermarkets in Kiev, as well as in-store facilities and stock, the Capital newspaper reported.

X5 entered Ukraine in 2005 via the acquisition of a local franchisee of Dutch food retailer Spar but has failed to substantially increase its presence.

It's London-listed shares were unchanged in a slightly lower market. (Reporting by Olga Sichkar and Maria Kiselyova; Editing by Erica Billingham)

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