CASH COW: The Maag Group announced plans to buy Rakvere Milk and merge it with a milk company from a neighboring city. Profits from the newly merged company are expected to reach 650 million kroons next year.
TALLINN - The Maag Group, an Estonian-owned firm, announced it would buy Rakvere Piim (Rakvere Milk) from its British owners.
Roland Lepp, chairman of Maag's supervisory board, said the acquisition was the biggest deal concluded by Maag so far. "For us it was an expensive deal, I cannot tell you more," he told the Aripaev business daily.
The paper said the deal might cost as much as 150 million kroons (9.6 million euros).
Valdis Noppel, manager of Maag Piimatoostus (Maag Dairy Company), said that negotiations with Rakvere's owner, Nevil Hewitt, had lasted a year.
Rakvere Piim, which ranks in the top three Estonian dairies, has undergone reorganization and recovered from the woes it suffered in recent years, Lepp said.
Maag would merge Rakvere Piim with its Maag Piimatoostus dairy holding based in Johvi, a neighboring city.
Consolidated sales by the new company are estimated to reach 650 million kroons next year, 300 million kroons short of the figure for Tere, the current market leader in milk products.
Maag also aims to get 5 percent of the Baltic market for dairy products, Lepp said.
Noppel said the agreement on the acquisition of Rakvere Piim signed last week would not be the last for the dairy holding of Maag, according to its expansion plans for the coming few years.
The seller of Rakvere Dairy is Alpamayo Ltd, which is co-owned by Hewitt, a Briton who previously has worked as CEO at the dairy. In addition to Rakvere Piim, Alpamayo owns a few agricultural companies in Estonia and a holding in the English pub in Rakvere.