Scandinavians to invest in Lithuanian dairies

  • 2001-04-19
  • Edvinas Butkus
VILNIUS - Scandinavian investors, mainly Swedes, have started implementing a major investment plan in the Lithuanian dairies sector, which has been striving for consolidation in recent years.

If completed, the investment by a Swedish fund and major Scandinavian farmer cooperative would be the largest ever in the dairy sector not only in Lithuania, but in Latvia and Estonia as well.

However, at this early stage it is not clear if Scandinavian control of the Lithuanian dairy group will bring specific quotas to export to the European Union, or at least open new markets in Scandinavia itself.

The Scandinavian companies Swedfund International AB and SwedeAgri Invest will acquire a new equity issue of the Lithuanian dairy group Pieno Zvaigzdes worth over 19 million litas ($4.75 million).

SwedeAgri Invest is presently the largest single shareholder of Pieno Zvaigzdes.

The decision has been taken by the board of Pieno Zvaigzdes, the company reported April 9 through the information service of the National Stock Exchange.

SwedeAgri and Arla Foods, a Swedish-Danish cooperative dairy group, are operating together in the project, said an adviser to the Swedish farmers' federation.

Swedfund International AB will be offered to acquire 4.25 million shares and SwedeAgri Invest 4.76 million shares of the new issue, with the face value of a share being 2.15 litas.

After the new equity issue is acquired, the authorized capital of Pieno Zvaigzdes would increase from 45.02 million to 54.03 million litas and the stake of the Swedish investors would exceed 26 percent of the authorized capital.

SwedeAgri Invest currently owns a 12.56 percent stake in Pieno Zvaigzdes.

Comprised of Mazeikiai dairy Mazeikiu Pienine, cheese maker Pasvalio Surine in Pasvalys and the Kaunas dairy Kauno Pienas, Pieno Zvaigzdes reported an unaudited net profit of 12.2 million litas on sales of 261 million litas for the year 2000.

Lennart Carlsson, an adviser to LRF, the Swedish farmers' federation, said SwedeAgri was planning long-term investment in Pieno Zvaigzdes.

"We are planning activities in this company for at least three to five years. We do not intend to take a majority stake. We are aiming at 33.3 percent of the shares, which would allow our participation in the decision-making," he was quoted as saying by the Lithuanian daily Lietuvos Rytas.

Carlsson denied, however, that Swedish investors intended to buy a portion of the planned 4 million litas share issue by Zemaitijos Pienas, another Lithuanian dairy, saying that their acquisition plans were limited to the dairy in Panevezys, Panevezio Pienas, at the moment.

Pieno Zvaigzdes on April 11 signed an agreement to acquire 22.6 percent of shares in Panevezio Pienas, a local dairy producer which reportedly has come under the influence of Vilniaus Bankas.

This brings Pieno Zvaigzdes' holding in Panevezio Pienas to 24.01 percent, the company announced through the Lithuanian stock exchange.

Julius Kvaraciejus, president of Pieno Zvaigzdes, confirmed to BNS that the company bought the shares from Vilniaus Bankas but refused to provide any details.

Also on April 11, Pieno Zvaigzdes asked the competition council's permission to acquire up to 50 percent of shares in Panevezio Pienas.

Panevezio Pienas, based in the central Lithuanian town of Panevezys, reported an audited loss of 4.9 million litas and sales of 72 million litas for 2000.

Lennart Carlsson confirmed to Lietuvos Rytas that talks had been underway with Vilniaus Bankas, Lithuania's largest commercial bank, on the acquisition of shares in Panevezio Pienas.

The Swedish bank Skandi-naviska Enskilda Banken holds around 99 percent of shares in Vilniaus Bankas.

Vilniaus Bankas' managers declined to comment on the sale of shares in Panevezio Pienas. Vilniaus Bankas together with its subsidiary company holds around 28 percent of shares in Panevezio Pienas. It is believed, however, that the bank actually owns more than 50 percent of shares in the company.

Asked if Arla Foods, a Swedish-Danish cooperative dairy group, is taking part in the negotiations with Vilniaus Bankas, Carlsson said Arla Foods and SwedeAgri were operating together. It has not been decided yet whether Arla Foods and SwedeAgri, both LRF members, should set up a joint venture for the management of shares in Lithuanian dairy companies, he said.

Lithuania's largest dairy company Rokiskio Suris, which already owns 11 percent of shares in Panevezio Pienas, also had plans to purchase the company. Antanas Trumpa, managing director of Rokiskio Suris, said they had paid 3.85 litas per share in Panevezio Pienas.

"The bank has chosen other investors. It's also interesting how much they will pay for shares in the Panevezys company – we offered to pay the bank 2.5 litas a share, but they did not sell," Trumpa was quoted as saying.

Asked if they were worried about the arrival of Scandinavian companies on the local dairy market, Trumpa said: "Unless Arla Foods has exceptional conditions, we do not fear competition. Things will be different if the new investors secure exceptional conditions, such as quotas for export to the European Union. In that case, other dairies would collapse."