Category: Lithuania

Sorainen has advised Ignitis Group subsidiary Ignitis Renewables on its acquisition of an onshore wind farm in the Plunge region, Lithuania. Roedl & Partner advised the developer’s shareholders on the sale of the development company.

According to Sorainen, the potential capacity of the acquired wind farm is up to 218 megawatts.

“The project is currently at the early development stage with environmental impact assessment procedures undergoing,” the firm informed. “Total preliminary investments, including the acquisition price and the construction cost, amount to around EUR 300 million. The completed wind farm will operate under market conditions.”

“The acquisition is a significant step forward towards the Ignitis Group’s objective to reach four gigawatts of installed green generation capacity by 2030 as set out in the strategy,” Sorainen reported. “With this acquisition, the total Ignitis Group’s portfolio of green generation projects in operation, construction, and development amounts to around 4.8 gigawatts.”

Ignitis Renewables is an energy company operating in the Baltic countries and Poland. The company specializes in the development of onshore and offshore wind, solar energy, biomass, and waste-to-energy projects.

Sorainen previously advised Ignitis Renewables on the acquisition of CVE in Latvia (as reported by CEE Legal Matters on September 12, 2022) and on the acquisition of three wind farm projects in Latvia (as reported by CEE Legal Matters on August 26, 2021).

The Sorainen team included Partners Sergej Butov and Asta Augutyte-Rapkeviciene, Senior Associate Laura Matuizaite-Mikste, and Associate Gabriele Raizyte.

The Roedl & Partner team included Associate Partner Liudgardas Maculevicius.

Sorainen has advised Encavis on its acquisition of a 69.3-megawatt onshore wind farm in Lithuania. Cobalt reportedly advised the sellers.

The transaction remains contingent on regulatory approval.

According to Sorainen, the wind farm is already connected to the grid. “The project was developed by E Energija and GE Energy Financial Services as co-sponsors of the wind farm. Encavis thus expands its portfolio to more than 2.1 gigawatts of generation capacity.”

“The wind farm, located in the Telsiai region of north-western Lithuania, consists of 13 of GE Renewable Energy’s 5.3-megawatt new-generation Cypress wind turbines,” the firm informed. “The generated electricity will be sold under a long-term power purchase agreement until December 31, 2031, to the Estonian state-owned utility Eesti Energia. The wind farm benefits from a long-term service agreement with General Electric Lithuania. E Energija will act as technical and commercial asset manager.”

Encavis is a Hamburg-based wind and solar park operator and is listed on the Deutsche Boerse. The company acquires and operates onshore wind farms and solar parks in 12 European countries.

“This acquisition not only serves as an entry for us into the Lithuanian market but also offers us the opportunity, together with E Energija, to realize further large-scale projects in the Baltic countries in the long term,” Encavis COO Mario Schirru commented.

The Sorainen team included Partners Sergej Butov, Asta Augutyte-Rapkeviciene, and Indre Sceponiene, Senior Associates Laura Matuizaite-Mikste, Svetlana Rudaja, Agne Sovaite, and Ieva Tumalaviciute, and Associates Gabriele Raizyte, Akvile Jurkaityte, Auridas Litvinas, Simonas Slitas, Sandra Aleksandraviciene, and Povilas Uzkuraitis.

Editor’s Note: After this article was published, Cobalt announced it had advised E Energija on the sale. The firm’s team included Partner Elijus Burgis and Senior Associate Julija Aleska.

Cobalt has successfully represented security services company UAB Grifs before a first-instance court and the Lithuanian Court of Appeal in a dispute regarding the company’s alleged failure to properly perform its obligations toward a client.

Founded in 2003, Grifs is a Lithuanian company that provides licensed security services for companies in the Baltic States.

According to Cobalt, “another company operating in Lithuania sought to recover almost EUR 500,000 in damages from Grifs for an alleged failure to perform its client’s obligations properly.”

The Cobalt team included Partner Marius Inta and Senior Associate Valdemaras Kovalevskis.

Sorainen has advised the Luminor Bank on Siauliu Bankas’ EUR 85 million issuance of restricted senior preferred notes. TGS Baltic advised Siauliu Bankas.

According to Sorainen, “Siauliu Bankas completed a tap issue of EUR 85 million of last year’s four-year senior preferred 1.047% coupon bonds. With a tap issue, the amount of the total outstanding bonds increased from EUR 75 million to EUR 160 million. The bonds were issued under the EUR 250 million EMTN Programme dated October 25, 2022, and are expected to be listed on the Nasdaq Baltic Debt Securities List.”

Sorainen also advised the Luminor Bank on Siauliu Bankas initial EUR 75 million issuance, last year (as reported by CEE Legal Matters on October 13, 2021).

Sorainen’s team included Partner Augustas Klezys and Senior Associate Agne Sovaite.

TGS Baltic’s team included Partner Vidmantas Drizga, Associate Partner Dalia Augaite, Senior Associate Karolina Lapinskaite, and Associate Kotryna Visockyte.

Editor’s Note: On December 13, 2022, TGS Baltic announced that EUR 160 million worth of bonds issued by Siauliu Bankas is being traded as of December 9.

Sorainen has advised Laba7 on a EUR 640,000 investment from the Coinvest Capital fund in cooperation with 44 members of the Lithuanian Business Angel Network LitBAN community. TGS Baltic advised Coinvest Capital.

Laba7 is a Lithuanian start-up developing suspension testing and servicing tools. According to Sorainen, “the new funds will allow Laba7 to further strengthen its R&D division, giving it the ability to bring even more products to the market. Moreover, the company also plans to increase its marketing efforts in order to be more visible on social media, the best exhibitions, and events.”

“These investments will help us take a big step towards our ambitious goals: we want to become leaders in cycle, motorcycle, and car sports and popularise the name of Lithuania,” Laba 7 Manager Andrius Liskus said. “We will continue to improve the products we already have, but most importantly, we will now have more opportunities to create new products, grow the team faster and allocate a budget for marketing. This is essential for us to become the number one choice.”

Sorainen’s team included Partner Mantas Petkevicius, Senior Associate Matas Maciulaitis, and Associate Goda Jakubauskaite.

TGS Baltic’s team included Partner Dalia Tamasauskaite-Ziliene and Associate Rimante Varapnicke.

Cobalt has advised Taba Invest on the development project for a 3.3-hectare area on the left bank of the river Nemunas in Kaunas through a joint venture with the SBA Group. Ellex advised the SBA Group.

As SBA Urban is also developing another 2.5-hectare plot in the Nemunaiciai district, according to Cobalt, “the companies applied to the Competition Council for a permit to establish a joint venture. If approved, each of the partners would own 50% of the shares of the newly established company.”

Taba Invest is an investment company that performs real estate management activities and provides hotel and catering services.

The SBA Group is a Vilnius-headquartered investment company focusing on the furniture, textile, modular construction, and real estate sectors. SBA Urban is a real estate developer.

“We believe in the potential of Kaunas, and especially the left bank of the Nemunas River and, as a financial investor in the project, we have assessed that organic development of the entire territory will create more value for us and our future clients than a spontaneous or eclectic one,” Taba Invest CEO Tautvydas Barstys commented. “However, in order to start work with our partners, we need to get the Competition Council’s permission to set up a joint venture.”

The Cobalt team included Managing Partner Irmantas Norkus and Partners Rasa Zasciurinskaite and Arturas Kojala.

Sorainen has advised Pon.Bike on its agreement with YIT Lietuva for the construction of a manufacturing facility in the Kedainiai Free Economic Zone.

According to Sorainen, the manufacturing facility will have a total area of 40,000 square meters. “The factory in Kedainiai FEZ is planned to open its doors and start operating in the middle of 2024,” the firm informed. “The three-story building will house bicycle assembly and paint workshops, as well as a warehouse and administrative offices.”

Pon.Bike is a Dutch company specializing in the bicycle industry. The company produces both conventional and electric bicycles.

YIT Lietuva is an urban development and construction company.

The Sorainen team included Partner Asta Augutyte-Rapkeviciene and Associate Simonas Slitas.

Sorainen has advised Invalda INVL on the EUR 40.2 million merger agreement with Siauliu Bankas for the merger of both companies’ retail businesses. 

The transaction remains contingent on regulatory approval.

“After the closing of the transaction, the Siauliu Bankas group, in addition to the financial services it already offers, will manage second and third-pillar pension funds and mutual funds in Lithuania and will provide life insurance services throughout the Baltic countries,” Sorainen informed. “Invalda INVL will obtain 9.39% of the share capital of Siauliu Bankas.”

Invalda INVL is an investment management and life insurance group operating in the Baltic region. Siauliu Bankas is a Lithuanian bank.

“The merger of these retail businesses will deliver greater value for clients, employees, and investors,” Invalda INVL President Darius Sulnis commented. “INVL’s existing clients will continue to receive professional saving, investment, and life insurance solutions as well as having additional access to the bank’s wider suite of services. The combined team’s shared aim is for the bank’s services to be the best choice available for customers. Employees, for their part, will have increased opportunities to develop and realize their potential. A bank that is actively growing, expanding its portfolio of services, maintaining high profitability, and is attentive to its share value should become even more attractive to institutional and private investors.”

The Sorainen team included Partners Mantas Petkevicius, Tomas Kontautas, Saule Dagilyte, and Daivis Svirinas and Associates Mindaugas Dominykas Baniulis, Agne Sovaite, Aurelija Daubaraite, Edita Dauksiene, and Gerda Skirbutiene.

Sorainen did not respond to our inquiry on the matter.

The corporate and M&A practice of Ilaw Lextal has been very busy working on employee option share investment schemes and overall transactional work, primarily driven by and likely to increase due to rising inflation and interest rates, according to Partner and practice Head Dziuginta Balciune.

“There is a rising possibility of sales of distressed assets right now, with companies attempting to cope with their financial obligations,” Balciune says. “We see this as an opportunity for the M&A sector in terms of boosting transactions. We’re not there yet, but there is increased interest, with companies that have seen their profitability decrease, like those trading in raw materials and metals, and are on the edge of profitability might end up being bought by bigger players,” she reports.

According to Balciune, there are three key drivers of work for Ilaw Lextal’s Corporate and M&A practice. “All of these are rooted in the current economic realities: record-high inflation rates of over 20% in the Baltics; insolvency rates doubled compared to last year; and increasingly rising interest rates that drive the cost of money up,” she explains. The inflation rate directly impacts M&A processes, with “any postponement and deferred payment clauses disappearing,” making it increasingly difficult to calculate prices, she reports.

While six months ago, insolvencies were as low in Lithuania as they had been before the 2008 crisis, according to Balciune, “that number has been growing fast – not necessarily indicating a recession, but a slowdown of the economy, certainly.” She also points out that many businesses in Lithuania are accustomed to financing their operations from credit institutions – “with money becoming more expensive, the impact could be high for companies working with a lot of debt.”

Balciune adds there is an expectation of an “overall M&A sector slowdown in terms of transaction volumes, compared to the last few years when there was a boom in the Baltics.” On the other hand, she shares that the “SME sector, as of yet, has not been as much impacted by the overall slowdown, and we presume that it will keep going strong for the following 12 months as well.”

Turning to Ilaw Lextal’s recent work, Balciune reports a few transactions of note. “A company of a German group – TUV Nord – acquired the remaining 50% of Tuvlita, one of the biggest companies providing compulsory vehicle inspection in Lithuania.  It was an inbound investment that led to high levels of work in our Corporate and M&A practice,” she says. “Also, the Netherlands-based company Blis Digital acquired HIPER Consultancy, a Lithuanian software development company co-located in the Netherlands and Lithuania, that helps its clients with improving software and digital products. Furthermore, UAB Synopticom shares were sold to an Estonian company Rait Group OU. Synopticom is one of the largest Lithuanian companies providing market and public opinion research.”

As a highlight, Balciune reports that Ilaw Lextal has seen a lot of activity in the field of corporate option shares. “Various companies, ranging from huge factories to fintech startups, are offering option shares to their employees instead of traditional bonuses. Our firm has been busy working on various employee incentive schemes for groups as well as negotiations for options agreements for sole employees,” she explains. This became a trend in Lithuania, according to her, since the country “introduced tax incentives for those option shares, making option shares for employees absolutely tax-free. They are very popular.” 

Finally, speaking about her firm and her team, Balciune says Ilaw Lextal is growing fast and currently transitioning from a mid-sized firm to a large one. “That, of course, has led to new hires in the Corporate and M&A practice: we’ve nearly doubled in size, from new Partners to Junior Associates. So we’re developing the practice and everyone’s skills – attending numerous foreign conferences, and making up for time lost during the lockdown.”

While Lithuania is registering an overall slowdown in M&A transactions, the renewables, technology, and healthcare sectors remain dynamic, according to Ellex Partner Ruta Armone.

“Lithuania’s M&A landscape is interesting,” Armone points out. “Last year was a record-breaking year in terms of large M&A projects, but this year we have a bit of a slowdown – we are going back to 2020 levels. We are still busy, with the top sectors being energy and renewables, technology, and healthcare.” According to her, “one area with fewer M&A activities is manufacturing, maybe except for high-technology lasers, pharmaceuticals, and biotechnology. The reasons for that are global trends and macroeconomic factors, such as inflation, uncertainty, and high-interest rates.”

“Initially, this was related to the war in Ukraine, but probably not anymore,” Armone explains. “Some projects were suspended or terminated, but the activity resumed in the next few months. However, some of the big infrastructure projects still remain on hold.” In general, she notes, “there are fewer large transactions, but rather medium-sized ones. Investors are still interested, however, the demand is not that high and the process of negotiations is more structured.”

According to Armone, the circumstances are different when it comes to renewables. “Wind and solar parks are very attractive targets in Lithuania nowadays, and whenever there is a new project on the market, competition is high as everyone wants a piece of it,” she notes, adding that, unlike regular M&As, renewables are sold at early stages, even before they are ready to be built. “Oftentimes, the sellers sell the company but continue developing projects until it becomes operational,” Armone points out. “In addition to what’s typical for M&As, energy transactions include provisions for project development and environmental considerations, so these are more complex transactions, especially when they take place at an early stage.”

Armone highlights that Lithuania is preparing to launch the first auction for a 700-megawatt Baltic offshore wind park in September 2023. “The first auction will have some state subsidies, while the second auction for another 700-megawatt offshore development most likely will not get governmental support,” she says. There are a few joint ventures intending to bid in the auction, one of which is Polenergia which entered into a joint venture with GreenGenius to join the bidding in the first auction for the offshore park. Everyone is looking forward to this, as the project will also ensure Lithuania’s energy independence.”

“We are still dependent on energy imports, which is why the government is also trying to help developers to develop local energy sources,” Armone continues. “In July there have been some changes in legislation on renewables, allowing for some restrictions to be lifted and for the project development to become quicker. The sector will likely remain very active in the future.”

Armone also highlights that there have been large transactions among technology companies. “Our second unicorn – Nord Security – recently attracted Novator Partners as an investor,” she says. “The financing round led by Novator Ventures amounted to USD 100 million and is a good development for the startup ecosystem in the country. Lithuanian fintech company Kevin recently also attracted USD 65 million dollars, which is the biggest Series A transaction in the Baltics, and the company is on track to become a unicorn.” According to her, there is also a consolidation trend in Lithuania’s life science market – Invalda, for example, is buying private clinics and now has a big portfolio of both medical and dental clinics. “Overall, while we are missing last year’s massive deals, our M&A landscape still shows the country’s huge potential,” Armone concludes.