The Talent

December 10, 2010 6:21 PM

Dealmaker of the Week: Oxana Balayan of Hogan Lovells

Posted by Tom Huddleston Jr.

Oxana Hogan Lovells corporate partner Oxana Balayan, 40, served as lead counsel for the buyer in this week's $1.65 billion acquisition of the Kopeyka retail store chain by Russia's X5 Retail Group, the country's largest selling retailer.

Not only was it the biggest deal in the history of the Russian retail sector, it also sent a strong message to any foreign retail companies looking for a foothold in the Russian market. U.S. retail behemoth Wal-Mart reportedly is poised to launch a presence in the country in the next two to three years, even after losing out on Kopeyka to X5. The U.S. company and Kopeyka had been involved in talks earlier this year, but could not come to an agreement on a price. Wal-Mart and other foreign retailers will now have to face off against a stronger than ever X5--which is the retail arm of conglomerate Alfa Group Consortium--when they eventually make a move into a Russian consumer market that some predict will be Europe's largest in ten years.

Kopeyka had been looking for a buyer for nearly a year. The negotiations with X5 ran roughly from July until December 6, the day the agreement was announced. It was, Balayan says, "quite a quick deal." The transaction strengthens X5's position as Russia's leading retailer in terms of sales. Kopeyka's 660 stores in Russia's European region, including ones in Moscow and St. Petersburg, likely will be converted to Pyaterochka stores--the chain owned by X5--by the end of 2012, the company said in a statement.

Balayan has handled several deals for X5 over the past four years, including the purchase of two supermarket chains: Karusel, for $940 million in 2008; and Paterson, for roughly $190 million in 2009. But, this deal presented a unique challenge because it was negotiated under new Russian retail trade laws that place restrictions on the extent of a retail chain's presence in each region. As a result, before receiving total clearance from the Russian competition authority, the negotiating companies had to agree to close some Kopeyka stores in certain regions.

"That was really very challenging and interesting to see how this law would operate in practice," Balayan says.

Perhaps the most significant difference between this X5 deal and prior ones is its size--it's the largest transaction the company's ever undertaken. The company needed to step up its game for negotiations on the largest retail acquisition in Russia's history, Balayan says, citing several internal approvals that were required and strategy sessions held up to the very last minutes before the deal was announced.

"It was just a very strong performance on our client's side--supported by the lawyers, of course," Balayan says.

The deal comes at a time when confidence in Russia's consumer markets is on the rise. In June, French dairy giant Danone merged in a $2 billion deal with Russian dairy company Unimilk, as Legal Week reported at the time. And PepsiCo just last week announced an agreement to pay $3.8 billion for Russian dairy and beverage company Wimm-Bill-Dann. "Consumer confidence--I cannot say it's booming--but, it's recovering fairly quickly," says Balayan.

That likely means a productive future for the firm's Russia-based transactions practice. "Just from a legal perspective, [this deal] was a great opportunity for us to demonstrate a strong increase in transactional capabilities, because such a deal requires substantial resources," she says.

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