Estonian textile manufacturer goes to the Finns

TALLINN - AS Marat, the largest Estonian textile manufacturer, was taken over Aug. 5 by the Scandinavian textile company Finnwear Oy, which purchased 77 percent of the company's shares.

Both firms have put a positive spin on the merger, citing an increased competitive edge, wider market coverage and combined professional know-how

"Competition in Finland is tightening. It's hard even for a company of Finnwear's size to expand on the domestic market," said Pertti Lahervouri, a member of the Finnwear board. "In Estonia, we can rely on the excellent cost-effectiveness ration and put more work into the creation of brand labels, which plays a significant role within the textile industry."

The merger included the sale of 3.2 million shares of AS Marat's 41.6 million kroon ($2.9 million) stock capita, which was owned by the company's board members and directors. Finnwear Oy has announced its plans to purchase the residual 23 percent of the Estonian textile manufacturer's shares, which are in the possession of small investors.

Marat has eight subsidiaries, seven of which are production units. The remaining one is a retail sales company.

"This merger between Marat and Finnwear is a strategic union, taking into consideration the common markets and similarity of the companies' structures," said Tapani Teeriaho, the board director of AS Marat. "This textile manufacturer is competitive on the European Union markets for its quality and cost-effectiveness as well," Teeriaho continued.

In addition to common markets like Sweden, Latvia and Lithuania, AS Marat exports about 3 percent of its products to the Russian markets.

"The Estonians have a lot more know-how in dealing with the Baltic and Russian customers, which makes Marat an especially attractive investment," said Torfinn Losvik, director general of Finnwear Oy. "Finnwear is a largely international company and the textile sector has been injected little investment on a world scale."

Marat employs 1,200 workers and has fully recovered from its record loss of 17 million kroons in 1995. Marat netted 11 million kroons last year.

"Marat's growth potential and the strong economic indicators the group has produced over the last year and a half simplifies the present merger considerably," said Losvik.

Long-term cooperation between Finnwear and Marat is nothing new. The two companies have since 1991 have been operating a joint venture in Estonia called AS Marwear.

Some Estonian economists, however, have been critical of Estonian industry in general for selling out to the Finns.

The most significant recent example before the Marat deal was the sale of the Rakvere meat packing company to a Finnish buyer.

But Marat officials downplayed that concern.

"The idea of selling the Estonian industry off to Finland is more of an emotional kind [of response]," said AS Marat spokesman Guido Viik. "More labor force will be engaged, thanks to this merger and this large investment will help to draw in more investment in the future."