Latvian dairies to merge

RIGA - Dairy company Rigas piena kombinats has reached agreement in principle on a merger with another Latvian dairy company, Valmieras piens, said Rigas piena kombinats’ majority shareholder, Russian businessman Andrei Beskhmelnitski in an interview with the daily Diena, reports Nozare.lv. As a result of the merger, an “unmatched national champion” will emerge in the dairy sector, which will be the fifth largest dairy company in the Baltic countries, he says.
To have such a clear-cut leader will be good for the entire dairy industry, because the leader is responsible for the development of a given market segment, added Beskhmelnitski.

He says that he has known the new Valmieras piens majority shareholder Yevgeny Varov for a long time, therefore nailing down the merger did not take long. Beskhmelnitski emphasizes that it would not be right to maintain two managing “super teams” for the two comparatively small assets, therefore the merger will bring about a number of advantages.
Beskhmelnitski explains that he also had been interested in Valmieras piens, but at that time there was insufficient information about the company, which is why he did not buy its shares.

The businessmen have not yet informed the Competition Council of their intentions, because they believe that such plans must be first made known to the public. After that, the necessary documents will be drawn up and presented to the Competition Council. It is planned that Rigas piena kombinats shareholders will have the majority in the merged company, but Beskhmelnitski declined to elaborate on this point.

On Nov. 2 it was announced that Varov had bought 91.89 percent of shares in Valmieras piens. Rigas piena kombinats announced this past March that Beskhmelnitski had become a majority shareholder in the company.
Last year Valmieras piens posted 29.6 million lats (42.2 million euros) in turnover, 9 percent more than in 2009. The company’s losses last year amounted to 885,000 lats, compared to a profit of 108,167 lats in 2009.
Rigas piena kombinats posted 1.4 million lats in losses last year, whereas the company’s turnover totaled 53.5 million lats, 28.6 percent more than in 2009.

In terms of industry leadership, innovation and development, however, it is questionable that merging two loss-making companies into one will result in an ‘unmatched national champion’ for Latvia, as Beskhmelnitski asserts.