Kesko Food and ICA combine Baltic operations
company belonging to the Swedish ICA AB Group, have signed an
agreement to set up a 50/50 joint venture for the Baltic food
market.
According to the agreement, the companies' current operations in Estonia, Latvia and Lithuania will be combined. The plan is for the joint venture to start operating by the end of 2004, subject to the approval of competition authorities and the completion of other conditions precedent, the companies said in a joint statement.
In the arrangement Kesko Food and ICA Baltic will transfer their Baltic grocery operations to a Swedish limited company, which will operate as an independent joint venture. Kesko Group says the value of the assets to be transferred to the joint venture was about €110 million at the end of 2003. Kesko says its additional investments in the joint venture will be specified as the arrangement becomes effective. Both companies will have a 50 per cent ownership and 50 per cent of the voting rights in the joint venture.
The arrangement is estimated to have no immediate significant effect on the results of the Kesko Group.
The companies say that the venture will support their strategies for growth in the Baltic countries. The aim is to reach market leadership in the area and a 25 per cent market share in three years. Consumers in the Baltics will benefit from wider and more varied product selections, while the companies added that they expect to gain synergy benefits in purchasing, store network development and logistics.
In 2003, Kesko Food and ICA had combined net sales of about €550 million euros in the Baltic countries. The total value of the Baltic food market was approximately €4.7 billion, representing a growth of over 5 per cent during the year. Kesko Food's Baltic business operations have been loss-making, but have developed as expected. ICA's Baltic operations have also been loss-making.
Kesko Food and ICA said the venture would have complementary strengths in the Baltic countries. Kesko Food is strongest in Estonia, where it holds the market leadership position, while ICA has strong presence in Latvia. The parties currently operate a total of about 150 food stores under hypermarket, supermarket and discounter concepts in Estonia, Latvia and Lithuania, as well as logistics centres.
Provided that an approval is obtained from competition authorities and the other conditions precedent are completed, Antonio Soares will be appointed as CEO of the joint venture and Seppo Hämäläinen as Deputy CEO. Today, Antonio Soares is the CEO of ICA Baltic AB and Seppo Hämäläinen is the Vice President of Kesko Food, Baltic Operations.
Kesko Food has currently six Citymarkets in Estonia and it owns Säästumarket, Estonia's biggest discounter chain, which includes 45 stores. In addition, Kesko Food has a SuperNetto cash-and-carry outlet and a logistics centre in Tallinn. In Latvia, Kesko Food has five Citymarkets and 17 SuperNetto discount stores. The total number of Kesko Food personnel in Estonia and Latvia is about 2,600.
ICA has five RIMI supermarkets and one RIMI hypermarket in Estonia. In Latvia, the company has 34 RIMI supermarkets and four RIMI hypermarkets as well as a logistics centre in Riga. In Lithuania, ICA has a total of 33 supermarkets and hypermarkets, most of which operate under the RIMI logo. In Vilnius, the company has a logistics centre. The total number of ICA personnel in the Baltic countries is about 5,500.
