VILNIUS - Rival dairies pulled off a crucial share swap that should finally end disputes in the industry and open up the path to the creation of two mega-dairy conglomerates in Lithuania.
Pieno Zvaigzdes, the country's leading dairy group, swapped a 10.97 percent stake in rival dairy Zemaitijos Pienas for a 33.33 percent stake in Panevezio Pienas, thereby lifting its holding in the latter to 97.53 percent.
Previously the 33.33 percent blocking stake in Zemaitijos Pienas belonged by Rokiskio Suris, a rival dairy group controlled by the Hermis Fondu Valdymas investment group.
Pieno Zvaigzdes and Rokiskio Suris, Lithuania's leading milk and cheese producers, had been at loggerheads for years over control of both Zemaitijos Pienas and Panevezio Pienas. In March, Pieno Zvaigzdes acquired a 6.93 percent stake in Zemaitijos Pienas from Vilniaus Bankas for 4.3 million litas (1.million euros) to increase its bargaining position vis-¹-vis Rokiskio Suris.
Last week's deal was valued at 14.6 million litas, showing that Pieno Zvaigzdes posted a spectacular gain in buying the stake from Vilniaus Bankas last month.
Valdas Tekorius, CEO of Pieno Zvaigzdes, refused to comment on the transaction.
Independent analysts said the deal pointed to a major consolidation in the industry.
"This share swap is a prelude to potential merger of Rokiskio Suris and Zemaitijos Pienas, which will leave only two large players on Lithuania's dairy market," suggested Marius Dubnikovas, an analyst with the brokerage Jusu Tarpininkas.
However, Algirdas Pazemeckas, CEO and key shareholder of Zemaitijos Pienas, said that the company had not been approached over possible merger with Rokiskio Suris.
"However, all options are open," he said.
On April 13 Rokisko Suris confirmed that it would like to take over Zemaitijos Pienas in the interest of industry consolidation.
"We would consider merging," Dalius Trumpa, production manager at Rokiskio Suris, said. "Consolidation in the dairy industry is a positive process."
Commenting the swap, Trumpa said, "We made this transaction because we consider Zemaitijos Pienas' shares to be a better investment than the illiquid shares of Panevezio Pienas."
Last year reports circulated that Zemaitijos Pienas had entered into talks with the Norwegian dairy group Synnove Finden. But the dairy did not conclude any contracts, Pazemeckas said, adding that the dairy producer was still interested in boosting exports to Norway.
The Swedish companies SwedeAgri Invest and Swedfund International control one-third of Pieno Zvaigzdes.
After assuming control of Rokiskio Suris earlier this year, the Hermis Fondu Valdymas investment group immediately took to including Zemaitijos Pienas in its strategic plans for the industry. The local press reported that the group acquired over 10 percent of Zemaitijos Pienas on the open market.
Industry regulators, however, balked at the idea of further consolidation in the industry.
Specifically, Lithuania's competition council said it was ruling out a merger between Rokiskio Suris and Zemaitijos Pienas until Lithuania joined the EU due to the two companies' dominant market position. Rokiskio Suris alone held a 36 percent share of the domestic raw milk market and a 28 percent share of the milk product market in 2003.
The council did note, however, that the possibility of a merger between the two leading dairy groups could be reconsidered after the country's accession to the EU on May 1.
Indeed, dairy producers believe that only through competition will they be able to defend their positions on the domestic market and export to foreign markets as well, particularly Poland.
(BNS)
