Category: Lithuania

Sorainen has advised the Modus Group on the merger of its UniPark brand with Parkdema, managed by the Energy and Infrastructure SME Fund of investment company Lords LB Asset Management. Lords was advised by Cobalt on the deal, which, following approval from the Lithuanian Competition Council, is expected in March 2018.

Modus Group, a multinational group of companies with operations in the Baltics, Belarus, Poland and Spain, is developing its business in four areas: renewable energy, car sharing service Citybee, smart parking solutions provider Unipark, and managing branches of eighteen car brands.

Lords LB Asset Management is an investment management company licensed by the Bank of Lithuania that has served institutional and private investors since 2008.

Sorainen represented the Modus Group in negotiations and assisted in preparation of the transaction structure and documentation. The firm’s team consisted of Counsel Mantas Petkevicius and Senior Associate Deimante Pagiriene.

Cobalt represented Parkdema in negotiations regarding the sale of shares and assisted with the creation of transaction-related documentation, as well as assisting it in obtaining merger clearance from the Lithuanian Competition Council. The firm’s team included Partner Elijus Burgis, Senior Associate Inga Mazvilaite, and Associates Justinas Sileika and Laurynas Juozapaitis.

Cobalt had successfully represented and defended the German company Danpower in an extraordinary case against the Lithuanian Ministry of Energy. In ruling for Danpower, the Supreme Administrative Court of Lithuania held that the Ministry of Energy had illegally suspended the German company’s investments in a new bio-fuel plant in Vilnius.

In its final non-appealable decision, the court stated that the Ministry of Energy had no legal or factual grounds for suspending and revoking the authorization granted to Danpower for the development of the plant.

Although, according to Cobalt, the company’s damages are still being assessed, preliminary estimates suggest that, because of the State’s actions, Vilnius residents overpaid more than EUR 4 million for heating.

Danpower invested about EUR 20 million in the biofuel CHP plant in Vilnius, after winning the auction for the feed-in tariff in 2013. The State committed itself for 12 years to buy in electricity at a higher price – 9.7 ct/kWh. However, according to Cobalt, the State failed to keep its promise to investors – the Ministry of Energy abolished the feed-in tariffs won in the auction. According to Danpower Board of Directors member Markus Suessmann, the investments therefore became loss-making.

“The treatment of the Ministry of Energy not only shook investors’ confidence in Lithuania’s commitments, but also harmed residents of Kaunas,” said Suessmann. “Higher prices for electricity supplied to the grid could have allowed cheaper production of heat energy. If we had built the plant already in 2015, heating bills for residents would have been lower by at least EUR 4 million. The investment could have also reduced Vilnius’ dependence on gas heating.”

According to Cobalt Partner Elijus Burgis, who represented Danpower in the litigation, the court’s ruling gives the German investor not only the right to further develop the project in Vilnius but also to claim multimillion damages from Lithuanian authorities. Indeed, Suessman says Danpower is considering defending its interests in arbitration in Washington. Lithuania has been given a warning under the investment protection agreement with Germany, stating that damages total EUR 30 million.

In addition to Burgis, Cobalt’s team included Senior Associate Ruslanas Cerniauskas and Associate Simas Paukstys.

Sorainen has advised Orion RE Income Fund I, managed by real estate development company Orion Asset Management, on the acquisition of the B66 business center in Kaunas, Lithuania, from developer YIT Kausta Bustas. 

According to Andrius Baranauskas, owner of Orion RE Income Fund I, the decision to invest was based on the attractive location of the business center, the fact that well-known companies were already settled there, and the overall project quality.

The Sorainen team consisted of Partner Kestutis Adamonis, Senior Associate Lina Ragainyte, and Associate Lina Stropute.

Image Source: yit.lt

Primus has represented the AUGA Group in int acquisition of 100% shares of UAB Arginta Engineering for EUR 6.4 million. Arginta Engineering was represented by Ellex Valiunas. Closing is contingent on the approval of the Competition Council of the Republic of Lithuania.

Primus describes the AUGA Group as “Europe’s largest organic food producer.” According to the firm, “the group of companies manages approximately 33,000 hectares of organically certified arable land and develops sustainable farming model, based on new technologies, specializing in crops, dairy cows, chicken, and mushroom growing. This acquisition will strengthen AUGA group’s competencies in technology sector.”

UAB Arginta Engineering specializes in the design and manufacture of non-standard metal constructions, with 98% of its products being exported.

The Primus team included Partners Giedre Dailidenaite and Ernesta Ziogiene.

The Ellex Valiunas team included Partner Dovile Burgiene and Senior Associates Ruta Besusparyte and Julija Nikitaraviciene.

TGS Baltic has represented the interests of Jonaiciai Ir Ko, a private gynecology clinic, in litigation against Lithuania’s State Tax Inspectorate after the clinic was ordered to prepare patients’ health files for a period of three years for tax inspection purposes.

The clinic filed a complaint requesting that the STI order be canceled.  

Citing data protection and privacy law concerns, Jonaiciai Ir Ko refused to present patient health files to the STI, claiming it was only allowed to do so without patient consent in exceptional cases. In addition, the clinic claimed, the requested data relates only to medical information, irrelevant to taxation issues, and thus is unnecessary for tax inspection purposes.

The Supreme Administrative Court of Lithuania sustained the complaint of Jonaiciai Ir Ko and cancelled the STI order.

TGS Baltic Senior Associate Erika Jurgutyte and Partner Daiva Usinskaite-Filonoviene represented Jonaiciai Ir Ko’s interests in all stages of the dispute. “We hope that this judicial process created a new precedent that such instructions of the tax administrator to present particularly sensitive personal health data of patients are disproportionate and unnecessary for implementation of tax inspection purposes,” the TGS Baltic team commented in a firm press release.

Cobalt has advised Agrosfera UAB and its Estonia-based shareholder Agromeril on the purchase of an additional share issue of Agrosfera UAB by ICOR. 

The value of the transaction was not disclosed. Following closing, which at the moment remains subject to merger clearance from Lithuania’s Competition Council, ICOR will control 60% of the shares in Agrosfera UAB. The remaining 40% of the shares and management of the company will be retained by the existing shareholders.

Founded in 2009, UAB Agrosfera is a Lithuania-based company trading in agricultural commodities and specialised in buying cereals from farmers.

According to Cobalt, ICOR, which started its activities in 1990, is among the largest groups in the region. The ICOR group has about 70 companies operating in four main business areas: utilities; industry and energy; real estate; and oil and oil products.

Cobalt assisted the shareholders of UAB Agrosfera in negotiations regarding the share issue and other documentation and advised the company on all transaction-related matters. The firm’s team included Partner Akvile Bosaite, Senior Associate Elena Vegelyte, and Associate Evaldas Petraitis.

Cobalt has represented the shareholders of UAB Ilsanta, a Lithuanian company installing and distributing medical devices and equipment, on the sale of 100% of the company’s shares to UAB ILS Holding. ILS Holding, which is part of the ZIA Valda investment company, was represented by Motieka & Audzevicius.

Ilsanta installs and distributes medical devices and equipment in the Baltic States and represents such producers as Boston Scientific, 3M, Ansell, Swan Morton, Unomedical, and Trumphf.

Ilsanta will complement the portfolio of companies managed by the Pharnasanta Group. The main shareholder of the Pharnasanta Group, which together with related entities holds 57.5% of the shares, is AB ZIA Valda.

“This transaction confirms prevailing trends in the market, when large companies consolidate their business by way of acquisition, and the number of companies managed by individual natural persons in the market is declining,” said Cobalt Lithuania Managing Partner Irmantas Norkus. “There will soon appear more such deals, and acquisitions will remain an attractive way for business to more rapidly expand and enter new markets.” 

The Cobalt team was led by Norkus, who was supported by Associate Mantas Juska.

Motieka & Audzevicius Partner Giedrius Kolesnikovas and Associate Rokas Jankus supervised the transaction for ILS Holding.

TGS Baltic and Sweden’s Hammarskiold & Co law firm advised UAB Euroapotheca, a Baltic and CEE pharmacy retail and wholesale group, on its purchase of Swedish pharmacy chain Apoteksgruppen from the Kingdom of Sweden. The seller was advised by the Lindahl and Cederquist law firms.

The value of the transaction was over EUR 171 million.

TGS Baltic describes the transaction — which is valued at over EUR 171 million — as “the biggest ever Lithuanian investment into the Swedish market,” and reports that it “considerably expands business relations not only between Lithuania and Sweden, but also between the CEE and the North European regions, forming one of the leading pharmacy chains in the Northern and Eastern Europe.”

In addition, according to TGS Baltic, the transaction was especially complex, as it consisted of two parallel processes: (1) the acquisition of Apoteksgruppen Holding Sverige AB, a state-owned central franchise holder; and (2) the acquisition of shares in approximately 130 private pharmacy companies owned by over 100 different private entrepreneurs. Both the sale processes were carried out in parallel by different investment bankers within one month of each other.

Euroapotheca is holding retail pharmacy chains and pharmaceuticals wholesalers in Lithuania, Latvia, Estonia, Poland, and Ukraine. The group currently has 454 pharmacies with consolidated revenue of EUR 353 million and employ almost 3,000 staff members servicing over 30 million customers each year. After the closing of the transaction, Euroapotheca will have over 600 pharmacies, the turnover of which will amount to EUR 750 million.

TGS Baltic Partner Marius Matonis was advisor to Euroapotheca in the process.

According to Dovile Burgiene, Partner at Ellex Valiunas, last year was good year in Lithuania. “I think in terms of foreign investment there have been a lot of transactions,” she says, with “easy access to money and credit.” 

Burgiene points to three specific areas of growth. First, she says, “one trend that’s very visible in the Baltics is that businesses are consolidating.” The most prominent examples, she says, include the merger in the summer of 2017 of the Baltic operations of Nordea and DNB Bank which resulted in the creation of Luminor Bank AS; Rimi Baltic’s acquisition of Palink — the operator of the IKI retail chain — which is expected to close soon, and which will represent a merger of the second and fourth biggest retailers in Lithuania; and the Vienna Insurance Group’s December 18 acquisition of Seesam Insurance. “Business needs size to be competitive in the Baltics,” Burgiene says. In addition, she points to “exits to foreign investors,” reflecting “quite a lot of interest from European and even US buyers.”

“Another area that we follow from our corporate group,” Burgiene says, “is setting up foreign companies. And in Lithuania we have a lot of business outsourcing. A lot of foreign companies, usually IT-related.” That outsourcing does “not so much involve call centers, but things like IT centers or offices handing client information.” According to her, “Lithuania is trying to attract these investors, who often come from Scandinavia and Germany to open up large companies in Lithuania.” That business is “always up and down, but this year has been good, with many companies opening up in cities other than the capital.”

The third source of business she points to is related to the Baltics’ reputation as a home of innovation in the tech sector. “There’s quite an active scene of startups and digital economy,” she says, “so FinTech is really growing. And our Central Bank is very attentive to payment institutions, and trying to attract companies that would have their headquarters here.” 

While Burgiene is pleased with the state of the Lithuanian economy, she cautions that the Baltic markets are so small that the real drivers of growth are outside their control. “The downside is always the same,” she says. “The Baltics are very small and open economies, so we are very sensitive to crises in larger economies which we export to and trade with. There is no sign of crisis in the local economy, but that’s not really the source of most crises are anyway, as we have very open economies.” As a result, she says, she and her colleagues pay close attention to recent signs that Sweden may be facing economic problems, for instance. Still, she does not deny that “the sentiment is good.”

Burgiene is hesitant to make a final pronouncement as to whether 2017 was “better” than the year before for her firm, noting that, “you can measure performance along a number of KPIs.” Still, she says, “2016 was a very very good year — and 2017 was the same. Financials are more or less the same, but we’ve worked on more interesting deals.” In particular, she says, “this year we’ve been able to enter several new areas, including Fintech and the GDPR, and Labor Law reform, for instance. Several areas of new products for us, so it’s been interesting.”

Finally, Burgiene is asked about the news that former Glimstedt Partner Paulius Gruodis has joined her team this month. “We regularly meet other partners in the market,” she says, “and we met him on several deals, and we’ve seen that the clients he represents have few conflicts with ours, and he has good relationships with them, so he can bring his client portfolios and relationships with him.” She notes that the firm has restructured a bit, with one of its three M&A partners — Ramunas Petravicius — shifting responsibility to take over as Co-Chair of the Litigation Department, meaning that “we need more manpower on the highest level. This means it would be just the two of us, so we needed a third partner to give clients.” Thus, Burgiene says, the decision to invite Gruodis to join them involved “basically his client portfolio and his seniority and experience.” She smiles. “The legal market is a people business, and you need to be present. Two of us are not enough.”