Category: Lithuania

On May 28, 2020, CEE Legal Matters reported that Cobalt had advised Lithuania’s AB Lietuvos Radijo ir Televizijos Centras – Telecentras on the sale of its data transmission and digital television business developed under the Mezon brand to the Bite Group. We spoke Aida Raziulyte, General Counsel of Telecentras, to learn more about the deal.

CEELM: To warm up, please tell our readers a few words about yourself and Telecentras.

Aida: I am a General Counsel of Telecentras and was the internal lead of the project team from the seller’s side. We do not have an in-house legal team beyond myself.

Telecentras is a leading terrestrial TV and radio broadcast infrastructure operator in Lithuania, established back in 1926, and owned by the state. In 2001, in addition to radio and television program transmission, the company started providing data transmission services to consumers, mostly living in remote areas. In 2016 Telecentras launched IPTV services.

CEELM: Can you tell us a bit about the business case behind the sale of the data transmission and digital television business?

Aida: A year ago, the board decided to primarily focus on a core Telecentras’ activities, i.e. broadcast and other wholesale infrastructure services, and therefore exit the telco retail market, which is highly competitive here in Lithuania.

CEELM: What would you say was the most complex aspect of the deal? What were your main takeaways that you are likely to apply should a deal like this come about again?

Aida: Perhaps the most complex aspect was that it was an asset deal, which, even though more flexible, is also way more complex than a share deal. Not to mention that negotiations are very tough, for parties can bargain over which assets will be acquired and which liabilities will be assumed, as opposed to the share deal whereas company is taken over with all the assets and liabilities. In addition, it takes a lot of effort from the sellers team to both have a very clear vision on how two businesses, i.e. the remaining one and the one to be transferred, should operate after the transaction is closed, and to work out the specific details of carve-out to ensure flawless future transfer of the business under the sale, and the continuity of both the remaining business and the one to be transferred.

The main takeaway in this deal is about how crucial the engagement of the team is. You should not spare time and effort on keeping the team on the same page all the time — continuously aligning on the objectives and the vision — for a carve-out is a rather tough exercise, since business does not stop for a single day. It is about selling a “moving target,” with data changing over time, with the need to update it all again and again, i.e., during the due diligence process, during negotiations, and prior to signing. Without the team intact it is easy to lose both stamina and momentum.

CEELM: How was the legal work split between your own in-house legal team and that of Cobalt? Was the firm involved in the negotiations of the terms of the sale as well or only in drafting up the contracts?

Aida: We have entrusted Cobalt team with all the legal work of the process, including the negotiations part, where Partner Elijus Burgis provided a stellar performance — very constructive and with a business-minded approach — which helped to successfully close the deal.

CEELM: And while on the topic, why did you opt to have Cobalt specifically assist you on this deal?

Aida: We have chosen Cobalt based on the combination of both experience needed and the quote of the offer. As in many cases, however, especially in professional services, it turned out that what mattered most is the individuals you get on board.

 “The Lithuanian Government has implemented multiple measures to combat the COVID-19 crisis,” says Rokas Bukauskas, Head of PwC Legal in Lithuania. “It all started with postponing tax payments from the companies which were affected the most, then went on to providing compensation to employees and other measures.”

According to Bukauskas, “the Government has already borrowed significant amounts in the financial markets to finance these support measures.” In addition, he says, “some of the financing measures went through a slow implementation process because of the red tape involved. However, the public sector institutions were keen to simplify complex procedures and requirements after receiving criticism from the private sector.”

Bukauskas reports that Lithuania is starting to open back up, but he says that of course things are still far from normal. “We are still under quarantine, even though we are now going through the relaxing process,” he says. “It’s hard to determine whether the actions the Government took were good enough from this perspective. We’ll have to wait a while and see. We have only had a rather small number of COVID-19 cases, so for now, the situation is under control.” 

Bukauskas adds that the economy has stalled and most investment projects have been suspended for the last couple of months in Lithuania. Nonetheless, he says, “most of the strategic investments that began prior to the crisis continued.” In addition, he says, “we have an 11 percent unemployment rate here in Lithuania, but that’s not as dramatic as it could have been. And we have passed the pandemic’s peak, meaning that we should not expect any additional drastic falls.”

“Lithuania is a larger economy than neighboring Latvia and Estonia,” Bukauskas notes. “As a result, the Government should be able to provide multiple possibilities for financing after the crisis ends. Of course, you can never really know whether any of the measures you impose are going to work in the long run. However, you still need to try different options and hope for good results. I hope that measures imposed by the Lithuanian Government will prove to be successful.”

In any event, Bukauskas, it’s not all bad. “The possibility of new market players emerging and new investors coming is ultimately a good thing,” he says. “People will seek new business opportunities and focus on things such as anti-money laundering or compliance more in the near future. The change, while it will require time, will be an interesting thing to witness nonetheless.”

Sorainen has advised Danielius Merkinas and Ceslovas Kazlauskas, the founders of NNL LT, on the acquisition of a 44% stake in NNL LT from Litcapital through an acquisition vehicle. TGS Baltic advised Litcapital.

According to Sorainen, “NNL LT is a logistics service provider focused on temperature-controlled goods, operating in Lithuania and Latvia. Consolidated revenue of the business exceeded EUR 20 million in 2019.”

Sorainen’s team consisted of Partners Algirdas Peksys, Mantas Petkevicius, and Saule Dagilyte, Senior Associate Rasa Mikutiene, and Associates Laura Matuizaite and Jurgita Tekoriene.

TGS Baltic’s team consisted of Partner Aurimas Pauliukevicius.

TGS Baltic and Dentons have advised Ignitis group on the approval of its renewed EUR 1.5 billion medium-term debt securities program and EUR 300 million bond issuance. Clifford Chance and Walles advised intermediaries BNP Paribas, Citi, J.P. Morgan, and Luminor bank.

The bonds were admitted to trading on the Luxembourg stock exchange and on Nasdaq Vilnius. Investors from the Baltic region acquired about 24% of the issue. The bonds will pay 2.000% annual interest and were subscribed at 2.148% yield.

The Ignitis group produces, distributes, and supplies energy and provides other energy services. According to TGS Baltic, “the Ignitis group also pays special attention to green energy development, aiming to become the region’s main competence center for new energy and a leader in distributed energy solutions in the Baltic Sea region and beyond.”

TGS Baltic’s team consisted of Partners Vidmantas Drizga and Robertas Degesys, Associate Partner Mantas Gofmanas, Senior Associate Augustinas Razumas and Legal Assistant Kotryna Visockyte.

Walless’s team consisted of Partners Joana Baublyte-Kulviete, Mindaugas Lukas, and Vaidotas Puklevicius, Associate Partner Laurynas Narvydas, and Associate Gabriele Adomaviciute.

Dentons’ London-based team included Partner Nick Hayday, Senior Associate Victoria Wyer, Associate Niharika Khimji and Trainee Jessica Matheret.

Clifford Chance’s London-based team was led by Partner Paul Deakins and included Senior Associate Kathryn McArdle and Trainee Solicitor Muzammil Malamji.

The Lithuanian life sciences industry has skyrocketed over the last two decades – the average annual growth within the biotechnology and pharmaceutical research and production sector reached over 19%, with 90% of its output exported. in 2017 Lithuania reached 16th place in the Scientific American Worldview biotechnology rankings. Lithuania dominates many (much) larger Central and Eastern European countries and boasts the fastest growing life science industry in Europe.

Currently, there are around 300 life science private companies in Lithuania and the private sector grows more than 50% a year (the average growth of life science turnover is 58%, and of pharma products is 60%).

Lithuania can now boast of investment by such companies as Moog, Teva group, Hollister, Thermo Fisher Scientific, Intersurgical. Furthermore, most of the largest worldwide innovative pharmaceutical companies (such as Johnson & Johnson, Pfizer, Novartis, Astra Zeneca, AbbVie, Sanofi, Lilly, and many others) have subsidiaries in Lithuania.

Moreover, Lithuania, which hopes to become the most attractive country in Europe for the development of Life Sciences, aims to have the sector yield five percent of GDP by 2030. Currently, the sector contributes more than one percent to Lithuania’s GDP, which is already six times the EU average.

Today’s success is not novel – the roots of the Lithuanian Life Sciences sector date back to the Soviet Union, when the Lithuanian sector was among the strongest in all the Soviet Republics.

The recipe for a strong Lithuanian Life Sciences sector includes, first, a well-developed educational system and qualified labor. Thus: 11% of all students (around 10,000) study Life Sciences in eight universities and nine colleges; there is an expert pool of 18,000 active life science researchers; and there are 16 research & development centers and five science centers which receive over 400 million euros of investments into equipment and infrastructure. 

Second, the recipe requires low costs and financial incentives. Thus: the country receives an estimated 400 million euros in EU structural & national support towards five specialized science and tech centers; there is a triple deduction of R&D cost from income tax; taxable profits are reduced by 50% if companies invest into substantial tech improvements; there is funding or reimbursement of the patenting costs for both academic institutions and private companies; and there are microgrants (so-called “innovation cheques”).

Finally, the recipe calls for a global outlook. Thus: 90% of Lithuanian life-science production is exported, to more than 100 countries; Medical device exports (including re-exports) have doubled since 2008 (particularly to the UK, Spain, Russia, France, and the US); every 10th scientific laser in the world was produced in Lithuania – and Lithuanian femtosecond laser systems take up to ten percent of the global market; there is a wide network of bilateral treaties on the protection of foreign direct investment against adverse state action; and there is a bilateral agreement with the Russian Federation on the promotion and reciprocal protection of investments making it a favorable starting platform for investments in Russia.

Lithuania, however, still has a lot of challenges ahead, which need to be addressed by the new Government, which will take office in November 2020. The main issues to solve during the upcoming political season include: Finding ways to apply R&D incentives to statistical, analytical, or data collection activities, as today the incentives are only applied to novel R&D activities which can be proven to have been performed in search of a solution to a technical problem; relaxing the requirements for innovative medicine reimbursement, as the current requirements remain overly strict and prevent Lithuanian patients from getting quick access to the most modern treatment and it sometimes takes up to ten years for new medicines to be included on the reimbursed medicines list; ensuring maximum transparency in project management and fund allocation; and removing unnecessary paperwork and administrative burdens, as well as unjustified economic barriers to the reimbursement of medicines, especially for oncological and rare diseases.

In general, the direction in which Lithuanian decision-makers are going is the right one, especially in terms of facilitating dialogue and listening to the arguments of all involved stakeholders. Despite that, as well as strong roots in Life Sciences, Lithuania has to think about issues of the future, including emigration, demographic challenges, and regional competition. This will become even more apparent after the Lithuanian parliamentary elections in October 2020.

By Ruta Pumputiene, Partner, Ruta Pumputiene Law Firm

This Article was originally published in Issue 7.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Cobalt has advised Lithuania’s AB Lietuvos Radijo ir Televizijos Centras – Telecentras on the sale of its data transmission and digital television business developed under the Mezon brand to Lithuania’s Bite Group.

According to Cobalt, “Telecentras has about 95,000 Internet service users and provides radio and TV broadcast transmission, data center, IT, infrastructure rental, telephony solutions, and other services.”

Cobalt’s team included Partners Elijus Burgis and Rasa Zasciurinskaite and Senior Associates Julija Timoscenko and Justinas Sileika.

Cobalt did not reply to our inquiry on the matter.

Editor’s Note: After this article was published CEE Legal Matters learned that Sorainen had advised Bite on the deal. According to Sorainen, the transaction is valued at over EUR 20 million. In addition, the firm reports, “Mezon Internet and data transmission services make up approximately 2% of the total Lithuanian telecommunications market. Around 97,000 customers use Mezon internet services, and over 11,000 customers watch Mezon TV, which is broadcasted via the wireless internet network.”

Sorainen’s team consisted of Partner Laimonas Skibarka, Daivis Svirinas, and Saule Dagilyte, Counsel Stasys Draydauskas, Senior Associates Jonas Kiauleikis, Vytautas Sabalys, Monika Malisauskaite-Vaupsiene, and Rasa Mikutiene, and Associate Dobile Minkute.

Subsequently, on January 6, 2021, Sorainen reported that the deal “was completed at the end of December in 2020, after the Competition Council and the Communications Regulatory Authority granted their approval, and after Bite made certain commitments.”

TGS Baltic has successfully defended the interests of TV Play at the Supreme Administrative Court of Lithuania against the Radio and Television Commission of Lithuania in a dispute involving the “must carry” obligation under Lithuanian law.

After five years of litigation, the Court has ruled that the Commission, while determining a question of exemption, must take into account if the obligation would be proportional to the service provider. In what TGS Baltic describes as “this unprecedented case,” the Court emphasized the obligation of a regulatory authority to apply EU law directly even if the national law does not provide such an obligation.

TGS Baltic’s team led by Partner Lina Daruliene, Senior Associate Indre Barauskiene, and Associate Rugile Gediminskaite.

Motieka & Audzevicius has successfully represented the Republic of Serbia before the Lithuanian Court of Appeals in a case regarding the enforcement of Serbia’s EUR 12 million claim against an unspecified Lithuanian company.

According to Motieka & Audzevicius, the “complex dispute” involved the jurisdiction of the court in disputes decided by a foreign arbitral tribunal, and the firm reports that it “successfully overturned the decision of the court of the first instance by which the court has denied acceptance of the client’s claim due to parallel arbitration proceedings.”

Ellex Valiunas has advised Northern Ireland’s Mzuri Holdings on the acquisition of 60% stake in Lithuanian window covering manufacturer Domus Lumina. Euroteises Biuras reportedly advised Domus Lumina.

The Ellex Valiunas team consisted of Partner Robertas Ciocys, Lawyers Laura Paulaite and Diana Cerkeviciute, and Junior Lawyer Jomile Baranauskaite.

Editor’s Note: After this article was published, CEELM learned that Euroteises Biuras’s team consisted of Partners Remigijus Bukenas and Inga Umbrasaite.

Laura Augyte-Kamarauskiene, the founder of the Lexem Law Partnership, has brought her entire team to Glimstedt.

Glimstedt describes Augyte-Kamarauskiene as “an independent expert of the European Commission for Justice, Freedom and Security since 2009.” According to the firm, “”she is highly experienced in dealing with professional civil liability lawsuits and disputes arising out of factoring agreements and promissory notes has extensive knowledge of standard debt recovery process in Lithuania and abroad, of contract law (real estate, distribution, agency agreements, and other notarized transactions), and of the implementation of publicly funded projects and agreements.” In addition, the firm reports, she “has expert knowledge in the field of recognition and enforcement of judicial and arbitral awards in Lithuania and abroad and is an arbitrator recommended by the Vilnius Court of Commercial Arbitration. She is expected to fortify the firm’s Migration Law Practice and Dispute Resolution Practice teams, in particular in cross border litigation, insurance, professional liability, and executive liability claims.”

Augyte-Kamarauskiene has a Master’s degree in law from the Vilnius University and a Ph.D. from the Mykolas Romeris University. Prior to joining Glimstedt, she spent almost eight years as the Chief Officer and the Deputy Director with the Ministry of Justice of Lithuania, almost two years as an Adviser with the Lithuanian Chamber of Notaries, and has helmed the Lexem Law Partnership since founding it in 2009.

“I have reached the highest peak in my professional career as a lawyer,” said Augyte-Kamarauskiene. “Therefore, I am very delighted right now to bring all my knowledge, experience, and expertise to Glimstedt with its long-standing traditions. I take this step in the career as a broad professional prospect that gives me an opportunity to achieve my future professional goals and to create added value for the Firm at the same time, but on top of that – to continue to provide our loyal clients with highest quality legal services that have now been enlarged in scope due to support and backup from the Firm’s international team.”

“We take efforts to help our clients in coping with the effects of the COVID-19 pandemic, in having their activities swiftly resumed and in grasping all new opportunities opening up,” said Glimstedt Managing Partner Solveiga Paleviciene. “This has inevitably triggered changes in our professional team. Lawyers Marius Embrektas [whose promotion to Partner was reported by CEE Legal Matters on May 15, 2020] and Laura Augyte-Kamarauskiene are highly acclaimed experts in their fields whose competence, foresight, and experience are particularly valued among their clients and colleges.”