X5 Retail, Russia’s largest grocer, has acquired the hypermarket chain Karusel, as the country gears up for an upsurge in retail consolidation.

The deal, which is worth between US$920 million and US$970 million (£463 million and£488.2 million), is due to close on July 1, pending approval from anti-monopolies authorities.

It will expand X5’s foothold in Russia’s hypermarket sector – the fastest-growing segment of Russia’s grocery market – adding 23 Karusel hypermarkets to its portfolio. It is estimated that hypermarkets will account for 16 per cent of grocery retail sales in the country by 2010, up from 6 per cent in 2006.

According to a report by consultancy PricewaterhouseCoopers (PwC), continuing consolidation “will be a major factor over the next three to five years” within the Russian market.

“With a largely unconsolidated retail market, further M&A activity is inevitable. This will lead to fewer retail players, with greater competition for market share and downward pressure on margins, which will affect both the retailer and the producer,” according to PwC’s retail and consumer leader Chris Skirrow in its report, Shopping for the Future.

Following completion of the acquisition by X5, Karusel’s existing hypermarkets, along with three still under construction, will be relaunched under X5’s new Mercado Supercenter fascia.

X5 – which operates the Perekrestok and Pyaterochka grocery chains – also plans to launch a supermarket chain called Green Perekrestok, to cater for Russia’s high-end customers.

Chairman Hervé Defforey said the acquisition will become a “landmark” deal in the sector and will provide the retailer with “immediate scale and substance” in hypermarkets.”

The grocer reported a 61 per cent increase in sales in its first quarter to US$1.8 billion (£905.8 million). Like-for-like sales were above expectations, up 29 per cent in local currency.