Category: Lithuania

Motieka & Audzevicius has advised the Linas Agro Group on its sale of assets in Russia and Belarus to undisclosed buyers and exit from the Russian market.

According to Linas Agro, the deal announced on August 26, 2022, involves two Russian companies – OOO VitOMEK in Moscow and OOO VitOMEK in Tver – and one in Belarus – IOOO Belfidagro – with the buyers being companies registered in the Russian Federation, but by agreement of the parties, they are not disclosed. “The transactions, totaling EUR 7.5 million, are expected to be completed by the end of the calendar year,” the company announced with the sale of Belfidagro being subject to the approval of the Belarusian competition authority.

According to the firm, “more than a year ago, with the acquisition of KG Group, Linas Agro Group became the indirect owner of companies in Russia and Belarus. The companies were prepared for sale, and the search for potential buyers started at the end of 2021.” 

“We had planned to sell companies in Russia and Belarus without a hurry; unfortunately, the situation has changed radically,” commented Linas Agro Group Chairman of the Board Darius Zubas. “The war in Ukraine has disrupted negotiations with the buyers we already had. The process of finding buyers was restarted, and intensive negotiations with several buyers followed. We had no expectation that we would sell the companies on the terms we expected back in early 2022. Negotiations and fine-tuning the sale details took some time, so we are delighted to have finally completed this difficult phase.”

The company still owns one entity in Belarus with Zubas commenting: “One company in Belarus, OOO KLM, could not be sold together with the others as we could not find an interested buyer; thus, we are continuing our search for buyers.”

The Motieka & Audzevicius team was led by Associates Laurynas Ramonas and Darius Amsiejus.

On June 28, 2022, CEE Legal Matters reported that Motieka & Audzevicius, working with Osborne Clarke, had advised the Orion Private Equity Debt Fund I on its EUR 7 million acquisition of secured mezzanine bonds issued by Austrian real estate developer Soini Asset to finance its real estate projects in Germany. CEE In-House Matters spoke with Benas Poderis, Head of Investment Management Department at the Orion Private Equity Debt Fund I to learn more about the deal.

CEEIHM: To start, tell us a bit about the Orion Fund.

Poderis: Orion Asset Management is one of the leading Lithuanian asset management companies, specializing in real estate, private debt, and private equity fields. Our flagship private debt fund is a blended strategy private debt fund in terms of debt instruments and business sectors. Generally, we are looking for 12-15% IRR generating private debt opportunities and combining both senior and junior debt instruments in real estate development projects, M&A, mezzanine for growth, etc. From its inception almost 4 years ago, the fund has already made more than 30 investments from EUR 1 million to EUR 7 million in the education, e-commerce, IT, high tech, agriculture, finance, and real estate sectors.

CEEIHM: As reported, the fund recently invested EUR 7 million in secured mezzanine bonds issued by Austrian real estate developer Soini Asset. What made this a particularly attractive investment for you?

Poderis: To make a long story short, it was just our deal by all parameters similar to what we do often in Lithuania (in terms of a good reputation sponsor, clear structure, covenants, expected return, security, high institutional level underlying real estate asset, etc.), except that in Germany, where we have never done anything before. That’s why we were a bit extra cautious thinking that it is too good to be true, maybe having a wrong assumption that private debt deals in Western Europe should usually have worse metrics than we have in the Baltics. This time it had more or less the same metrics, but geographically it was interesting to do something abroad and diversify our portfolio from the Baltics.

CEEIHM: What was the most challenging aspect of the investment from a legal perspective?

Poderis: Probably timing, but to be honest we were surprised ourselves with how smooth and easy the process was. All parties were dedicated professionals, negotiations were quick, and proposals by all parties from both the legal and financial perspectives were very reasonable. The documentation itself was very clear and easy to digest. We were kidding that we were not sure if it was due to good people on both sides or if it was German law making it easy.

CEEIHM: What was Motieka & Audzevicius’ mandate exactly?

Poderis: We asked them to find a german law firm to work in a deal together and to coordinate all the processes and communication from our side with the German law advisers (Osborne Clarke) and the legal advisers of the issuer of bonds. They were very involved in the process, making revisions to draft documents as in the financing documentation there are plenty of aspects that are universal, and having a legal team knowing our business was very useful.

CEEIHM: And why did you choose them as your advisors on this deal?

Poderis: We have made several deals together before,  we know what to expect from them, they know that we are very pragmatic and straightforward with our processes, and they already know our appetite for risk and investment strategy – all making it easy to work together.

Originally reported by CEE In-House Matters.

Walless has advised LitCapital on its investment in the peer-to-peer sharing platform Sena.lt (Horizontal Media).

“Following the implementation of the business development plan, Horizontal Media is expected to significantly extend the functionality of the existing platform and expand into other business areas and new products such as classified ad segments,” a Walless press release stated. “The fund’s investment will allow Horizontal Media to strengthen its financial position, improve the quality of customer service and develop the functionality of its platforms. Horizontal Media is expected to generate sales of EUR 4 million in 2023.”

Founded in 2010, LitCapital is a growth capital fund focusing on investments in companies in the Baltic region.

Horizontal Media manages a platform for second-hand books where registered users can post ads for the used books they wish to sell, trade, or give away.

“The changing market trends and increasing focus on the circular economy mean that more products will enjoy a second even third, fourth, or more life as people become more used to buying used products instead of new ones,” Horizontal Media CEO Per Moller commented. “Various online platforms that are ready to help people on this pathway are on the course to reap significant benefits. There are additional complementary business segments where we are going to expand.”

The Walless team included Managing Partner Dovile Burgiene, Associate Partner Arturas Grimaila, and Junior Associate Auste Lideikyte.

Influenced by geopolitics and the ongoing state of emergency measures, Lithuania is dealing with high construction prices and a decreasing number of investments, according to Noor Managing Partner Giedrius Murauskas.

“We have direct borders with Russia and Belarus and, of course, we are deeply affected by the geopolitical situation,” Murauskas begins. “Lithuania has an active start-up market but, these days, some of the projects are on hold. Investors from the UK and the US see us as a conflict-bordering country and are more cautious about their investments. Our close neighbors – Latvia, Estonia, and Poland – on the other hand, have a less radical view of the situation. But in their case, there is an issue of available finances.”

“Immediately after the war broke out, the oil and construction material prices increased drastically,” Murauskas adds. “It took us some time to renegotiate contracts for clients, as it was impossible to continue contracts with the initially allocated prices. It was also a challenge for governmental institutions to renegotiate ongoing projects.” Yet, according to him, only a few cases ended up in courts, as the majority of them were resolved peacefully.

Murauskas highlights that state of emergency measures are still in place in Lithuania. “In practice, it does not have many implications – we don’t have soldiers on the streets,” he notes, adding that, “however, it allows the state to allocate resources differently and send funding wherever it is needed the most. This is not very pleasant for foreign investors and is negatively affecting the market.”

“Other than that,” Murauskas says, “unrelated to the geopolitical situation, we have seen an increasing number of cases on the GDPR. Certain instances of databases being breached and data being leaked have resulted in various litigations between consumers and companies. The government is closely supervising these particular areas as well, and looking into potential fines, to ensure the future protection of consumer rights.”

“Interestingly, Lithuania recently liberalized the energy market – consumers can now choose between six suppliers who will provide electricity,” Murauskas adds. “Many companies initiated large PR campaigns to promote their products and prices. This has led to some practical issues as, on the one hand, some schemes are quite complex and create challenges for consumers.” On the other hand, he notes, “just last week we witnessed an interesting development – a company which had already signed agreements with 180,000 customers announced that it cannot provide the service according to the planned prices. There are some talks about initiating a class action against the company, with the government also considering imposing certain sanctions.” For him, the company’s bankruptcy is a distinct possibility.

“Overall,” Murauskas says, “there are noticeable changes in the Lithuanian legal market. The SPC Legal and Wint merger to form Noor is definitely among the bigger events – we’re hoping it will change the legal services market landscape in Lithuania.” Another noteworthy change, according to him, is the significant increase in the prices of legal services. “The trend is quite obvious, as some law firms have already increased prices twice since the war started. Of course, inflation affects the legal services market and it will likely continue to do so, depending on how deep the recession will be,” Murauskas concludes.

Motieka & Audzevicius has advised Orbio World on the acquisition of Neorus from Ingrida Cerniauskaite. Noor advised the seller on the deal.

Orbio World is a direct-to-consumer retailer with a specialization in e-commerce.

UAB Neorus is a startup company engaged in the e-commerce business of distribution and wholesale of various skin cosmetics and body hygiene products, including creams, serums, cleansers, face massagers, and face masks.

The Motieka & Audzevicius team included Partner Rokas Jankus, Senior Associates Raminta Stravinskaite and Aivaras Grigas, and Associate Darius Amsiejus.

Noor’s team included Senior Associate Audrius Slazinskas.

Cobalt has advised Braitin on its acquisition of the Prie Vilneles project in Markuciai from developer Realco.

“The construction of project Prie Vilneles started in May 2021,” Cobalt informed. There are plans “to build 220 apartments in the complex rising on the left bank of the Vilnele river, with pedestrian and bicycle paths next to it. Residents will be able to enjoy the nearby green spaces as well, as the district falls within the territory of the Pavilniai Regional Park. After acquiring the project, Braitin, together with investors, plans to invest EUR 21 million in its development. The construction of the complex is expected to be completed at the end of 2022.”

Braitin is an investment company that focuses on real estate development, as well as renewable energy projects related to hydropower, wind, solar, geothermal, and biomass energy.

Founded in 2006, Realco is a Lithuanian real estate development company, specializing in building and developing residential, public, and commercial projects.

The Cobalt team included Partner Arturas Kojala.

As the main trends of the transaction market in the first half of 2022, the boom of startups and the changes in their valuations, the undiminished confidence of foreign investors despite the geopolitical situation, and the ongoing consolidation of the health care and renewable energy sectors can be singled out.

In the ongoing negotiations for venture capital deals, valuations can be seen falling. This corresponds to a trend on a global scale (a clear example of this is the case of Klarna). However, it is not clear from public information at which financing stage this trend is more pronounced: in Lithuania, it is observed in some smaller transactions, when startups that have not yet gained “weight” in the market seek to attract financing. Market leaders recorded record amounts in the first half of the year, for example Vercom, listed on the Warsaw Stock Exchange, acquired the e-mail marketing platform MailerLite for EUR 84 million, and the payment platform kevin. raised USD 65 million in the Series A funding round.

On the other hand, despite the geopolitical challenges, strategic investors show confidence in the prospects of Lithuania and the entire Baltic region. Major deals in the manufacturing sector are the best confirmation of this: Norway’s Kongsberg Defense & Aerospace, the largest Nordic space technology company, acquired 77% of Lithuanian small satellite developer NanoAvionics, and BEWI, one of the world’s largest packaging and insulation solutions companies, acquired 100% of Baltijos polistirenas shares.

One of the sectors showing the most pronounced consolidation trends is healthcare services. The largest transaction completed in Lithuania in this sector so far is the merger of the private medical business networks “InMedica” and “MediCA Group”. At least three active consolidators operate in the market – Affidea, Innova Capital Group (which acquired the shares of the largest dental network in Lithuania, Clinic DPC) and INVL Baltic Sea Growth Fund (which, among other transactions, signed the acquisition of the Nemunas and Eglės sanatorija clinics). The latter fund is also active in other sectors: it has been consolidating the waste management sector in the Baltic countries for some time, and also acquired the business of one of the largest life insurance companies in Finland, Mandatum Life, in Lithuania, Latvia and Estonia. Consolidation of the pharmacy sector is taking place both on a Baltic scale (Magnum’s acquisition of the Apotheca pharmacy chain) and on a wider regional level (Euroapotheca establishing a joint venture with Oriola Corporation, which will combine the pharmacy business of both countries in Sweden).

The renewable energy sector is active in terms of both development and acquisitions. The Danish renewable energy company “European Energy” intends to invest about EUR 1.5 billion in Lithuania by 2024 and build wind and solar power plants with a total capacity of more than 1,000 MW, and “Green Genius” has acquired 100% of the shares in the company, which has the right to develop an 85 MW wind power park in Jurbarkas district.

Transaction market trends in Estonia.

Transaction market trends in Latvia.

By Juozas Rimas, Partner, COBALT

Noerr has advised Rebelle as the target company of a public takeover offer made by Lithuania’s Vinted. Gernandt & Danielsson reportedly also advised Rebelle. Roschier and Hengeler Mueller reportedly advised Vinted.

Closing is expected in August 2022, pending regulatory approval.

According to Noerr, “Vinted is offering Rebelle shareholders a cash payment of SEK 14.10 per Rebelle share. This corresponds to a total offer value of approximately SEK 315 million. Rebelle’s board of directors has recommended that the shareholders of Rebelle accept the offer.”

Rebelle is the parent company of Hamburg-based StyleRemains, which operates Rebelle.com, an online marketplace for second-hand designer fashion. Rebelle’s shares have been traded on the Nasdaq First North Growth Market in Stockholm since February 2022.

Founded in Vilnius, Lithuania, in 2008, Vinted operates an online marketplace for second-hand fashion. The company has operations in France, Germany, Belgium, Spain, Italy, the Netherlands, Austria, Poland, the Czech Republic, Lithuania, Luxembourg, the UK, and the US.

The Noerr team was led by Hamburg-based Partner Stephan Schulz and included Senior Associate Jan Hoffmann Linhard and Associate Marco Siemers.

Fort Legal has advised Eften Capital on the acquisition of the Talino real estate project from Rewo. Walless advised the seller.

According to Fort, “the buildings to be constructed during the first phase of the development project, with 145 apartments, will be transferred to the … fund.” The project is being developed in the Justiniskes district of Vilnius. 

Eften Capital is a Baltic commercial real estate fund manager. Rewo is a real estate developer.

“The strategic direction of Eften Residential Fund is to develop mid-range or economy class family-friendly modern apartment projects with a well-developed infrastructure, implemented by a reputable developer,” Eften Capital Lietuva CEO Laurynas Zilys commented. “The Talino project met all these criteria, so we are happy that we managed to reach an agreement with Rewo.”

In 2021, Fort advised Eften Capital on its investment in the Kaunas residential project (as reported by CEE Legal Matters on November 26, 2021) and its industrial buildings acquisition (as reported by CEE Legal Matters on June 28, 2021).

The Fort team included Partner Ruta Radzeviciute-Meizeraite.

The Walless team was led by Partner Evaldas Klimas.

The Rewo in-house team included Lawyer Agne Bielinskiene.

Constantly expanding and becoming increasingly diverse, complex, and risk-laden, the environmental, social, and governance landscape affects and challenges most businesses. New laws and regulations are having broad implications for organizations. According to EY Global Law Leader Cornelius Grossmann, “we are seeing a major pivot from a world in which sustainability was about messaging and voluntary commitments, to a world in which implementation is key and reputational risks are becoming more acute.” Nowadays, society no longer expects companies to simply do no harm, but also expects them to appropriately address environmental and social matters. In order for those matters to be properly addressed, it is crucial to focus on legal requirements for compliance in terms of ESG.

ESG-Related Requirements in Lithuanian Legislation

According to the laws currently in force in Lithuania, companies, in addition to annual financial reports, must also prepare an annual publication that must include an analysis of non-financial performance, inter alia information related to environmental protection, personnel, etc. These requirements are mandatorily applicable for those entities which fall under the definition of large companies, public interest companies, and state or municipal companies.

A company is considered to be large if at least two of the following indicators are confirmed on the last day of the financial year: (1) the value of assets indicated in the balance sheet exceeds EUR 20 million; (2) the net sales revenue during the reporting financial year exceeds EUR 40 million; (3) the average annual number of employees during the reporting financial year exceeds 250 employees.

A public interest company is defined as a company whose activities are important to the public, in terms of scale or nature, due to the number of its customers. Public interest companies are those whose securities are traded on the regulated market, commercial banks and the Central Credit Union, financial brokerage companies, collective investment undertakings, pension funds, occupational pension funds, and management companies that manage at least one aforementioned entity, as well as associations of participants of occupational pension funds, insurance companies, and reinsurance companies. State and municipal companies may qualify as public interest companies under certain conditions established by the law.

Large public interest companies, whose average annual number of employees during the reporting financial year exceeds 500 on the last day of that year, shall include in the annual report a social responsibility report containing the information specified in Article 8 of EU Regulation 2020/852 (Taxonomy Regulation): in particular, information on the proportion of the turnover, capital expenditure, or operating expenditure of such large non-financial companies that is associated with environmentally sustainable economic activities. Social responsibility reports must also include the following information: a brief description of the company’s business model, a description of the company’s policy including the control over the implementation of this policy, the results of the company’s policy, information on the main risks related to the company’s activities and how the company manages those risks, and non-financial key performance indicators related to specific activities.

While it would be disproportionately burdensome to extend such a requirement to smaller companies, those companies may voluntarily decide to publish such information.

The CEO and members of the management and supervisory bodies are responsible for the preparation and publication of the company’s annual report and separate social responsibility report, in accordance with the procedure established by law. CEOs and members of the management and supervisory bodies who do not perform their duties according to the competence assigned by law, or perform them improperly, must compensate the company and/or other persons for all the damage caused.

Under the Taxonomy Regulation, the European Commission had to come up with the actual list of environmentally sustainable activities by defining technical screening criteria for each environmental objective through delegated acts. As long as those are not issued yet, many large companies in Lithuania prepare their reports on non-financial activity by following alternative soft law rules such as guidelines, recommendations, or standards – for instance, the GHG protocol, GRI standard, etc. Implying that, despite ambiguous guidance from regulators, stakeholder pressure and competing goals within the business itself put a huge amount of pressure on organizations in relation to ESG compliance.

Lauras Butkevicius, Partner, and Evelina Nedzinskaite, Associate, EY Law

This Article was originally published in Issue 9.7 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.