RIGA - With hopes to expand into the Russian market, Finland's Kesko Food announced the planned sale of its 50 percent stake in Rimi Baltic to Swedish ICA Baltic for 190 million euros. The sale, which was announced on Oct. 10, will leave ICA Sweden as the sole owner of Rimi Baltic.
In a separate deal, the four Rimi stores in Estonia, which were owned by Kesko, are to be transferred to Rimi Baltic for an extra 50 million euros. By selling its stake in Rimi Baltic, Kesko will be released of the guarantees and liabilities attached. Additionally, Rimi Baltic will pay back its 24 million euro loan to Kesko Food.
Kesko will earn a total profit of 155 million euros from the two deals.
The Finnish firm plans to use the profits of the sale to finance further international growth, which includes investment in Russia as well as expanding its store network in Finland.
President and CEO of ICA Baltic, Kenneth Bengtsson, said that the deal was in line with ICA's goal of being number one in all markets where it operated. Full ownership in Rimi Baltic would also increase ICA's growth potential in the fast growing Baltic market, he said.
Bengtsson added that by integrating Rimi Baltic as a wholly owned company, ICA would be able to realize cost savings in human resources, administration and IT.
"This transaction is in line with ICA's goal to become the leader in all its markets of operation. Control of all the shares of Rimi Baltic will boost our growth potential in the fast-growing Baltic markets," ICA president Kennet Bengstsson said in a press release. The transaction will be finalized after all required permissions of antitrust authorities are obtained. The deal requires the approval of the European Commission, which is expected to make its decision by the end of this year. Rimi Baltic currently has about 16 percent of the total Baltic food market that is annually worth approximately 5.2 billion euros.
In 2005, Rimi Baltic had a turnover of 810 million euros and an EBIT of 1.2 million euros. The turnover for the first six months of 2006 amounted to approximately 450 million euros, an increase of 20 percent compared to the same period in 2005.
Rimi Baltic has a total of 200 stores, with 64 in Estonia, 86 in Latvia and 50 Lithuania. The company employs a total of 9,722 people in the Baltic states.