Ica buys IKI in Lithuania
Swedish ICA buys Lithuanian grocery chain IKI. The purchase price is 213 million euro, which corresponds to approximately 2.2 billion Swedish kronor.
With the acquisition of UAB Palink, which runs the chain, ICA will be second largest in the Lithuanian market, according fri-kopenskap.se.
Rimi Baltic has been in the area for many years, with a market share of roughly eight percent and 56 stores. The Baltic initiative was started by the Norwegian business tycoon Stein Erik Hagen. Hagen is out of Rimi and ICA many years ago, but still strongly involved in business. Among many other interests he is the biggest shareholder in Orkla, www.orkla.no
“Lithuania is the largest of the Baltic markets, but also the country where Rimi Baltic had the lowest market share. This gives us a quick upscaling of operations and significant cost synergies. IKI stands out with well-developed stores, a high level of service and a wide range of products. IKI also complements Rimi well”, says Ica Group CEO Per Strömberg.
Deal needs approval
Among the current owners are German Rewe, Coop Switzerland and Belgian Colruyt Group. The purchase is funded through a combination of cash together with existing credit facilities. A conclusion of the deal is conditional upon approval from the competition authorities, which is expected by the end of 2017.
The acquisition of IKI means that ICA Gruppen through Rimi Baltic will become the second largest player in the growing Lithuanian grocery retail market, from being the fourth largest currently.
Cost synergies
UAB Palink is acquired for 213 million euro on a cash and debt free basis, corresponding to an EBITDA-multiple of approximately 6.1 times and an EBIT-multiple of approximately 11.6 times for the twelve months ending in September 2016.
The transaction is expected to generate yearly cost synergies of approximately 15 million euro when fully realized in 2020. The synergies are mainly related to increased purchasing volumes, more efficient logistics and marketing. The acquisition is expected to lead to one-off costs of approximately 40 million euro and related investments amounting to approximately 25 million euro during 2017-2019, ICA says in a press release.
SEB Corporate Finance and SUMMA Advisers have acted as financial advisors and Gernandt & Danielsson and Valiunas Ellex have acted as legal advisors to ICA Gruppen in connection to the transaction.
About Rimi Baltic
Rimi Baltic operates a grocery retail business in Estonia, Latvia and Lithuania through the store concepts Rimi Hypermarket, Rimi Supermarket as well as Supernetto and Säästumarket. There are 262 stores in total: 88 in Estonia, 118 in Latvia and 56 in Lithuania.
About IKI
IKI is one of Lithuania’s leading grocery retail chains and was founded in 1991 by three brothers, George, Oliver and Nicolas Ortiz. The current owners are Rewe, Coop Switzerland, Colruyt Group, Unilec, CONAD, and UAB Baltisches Haus. The store network consists of approximately 230 stores and IKI has approximately 7,000 employees. IKI currently has three store formats: IKI Premium Supermarket, IKI Supermarket and IKI Express.
IKI key financials
| EURm | 2015 | 12 months Oct 2015 - Sep 2016 |
| Sales | 596.7 | 629.8 |
| EBITDA | 28.8 | 35.1 |
| EBITDA margin | 4.8% | 5.6% |
| EBIT | 11.8 | 18.3 |
| EBIT margin | 2.0% | 2.9% |
Lithuania
Lithuania has approximately three million inhabitants. The grocery retail market had sales of approximately four billion euro during the twelve months ending in September 2016 according to official Lithuanian country statistics.