RIGA - Norwegian food giant Orkla Foods has announced that it would buy Spilva, the largest fruit and vegetable processing company in Latvia, and has already asked the Latvian Competition Council for permission to acquire 100 percent in the company.
Orkla Foods director Hakon Mageli said the value of the deal would not be disclosed.
The acquisition will allow Orkla Foods, which currently sells its products in Latvia through its Estonian subsidiary, Poltsamaa Felix, to strengthen its positions in the Baltic markets, according to the firm's CEO Dag Opedal.
However, the acquisition of Spilva will need approval from the Competition Council since both parties to the deal jointly have over a 40 percent market share in at least one segment, and because the takeover could affect other players in the market.
The Competition Council will be looking into the application and may make a decision by June 5, although the deadline may be extended until Sept. 5.
Orkla also pledged that Spilva management and staff, including the company president, would continue to work at the company.
Spilva President Lolita Bemhena told Dienas Bizness last week that the deal has not yet taken place, though a Spilva spokesperson told the Baltic News Service on May 24 that both sides had signed a document confirming the company's intention to find a strategic investor.
Bemhena did admit that Spilva needed a strategic investor and that attracting such an investor was provided for under the company's development plans. Although she said the company's present position on the market was satisfactory, a strategic investor was needed in order to expand operations in the future.
"The situation in the Baltic market last year was stable, while in Russia it was good, as sales increased. But exports to EU member states did not grow last year since Spilva's marketing resources are limited," Bemhena was quoted saying. "The large export markets are saturated and therefore require advertising campaigns with large budgets."
"Now, after Baltic accession to the EU, a price increase is seen and the pressure of imported products in the local market is growing," she said.
Orkla, one of the largest multi-industry groups in Norway focusing on food production, generated NOK 7.8 billion sales in the first quarter of 2004, up 12 percent from the same period last year.
Last year Spilva generated sales of 6.3 million lats (9.5 million euros), up 10.3 percent from 2002. Bemhena explained the increase as a retained market share and growing sales in the export market by 13 percent, while profits last year were 679,000 lats. In 2002 the company had net sales of 5.7 million lats and a profit of 314,500 lats.
In 2003 the company invested 729,000 lats into development, of which the biggest investment was channeled toward the expansion of production and purchase of technological equipment.
"Generally 2003 was a very hard but good year. It was a year when a dialogue between businesses, politicians and the Agriculture Ministry began developing.
The government started to listen to the problems of processing companies," said Bemhena, adding that Spilva wanted to increase its market share in Russia.
