Market
04.06.2015
By mergers.lv
iStockphoto

Life moves in mysterious ways indeed. After years of almost complete obscurity Alta Capital, the symbol of aggressive private equity deal making during the 2000s, has suddenly resurfaced and reminded about itself. Just a week ago we had to mention it when talking about the past ownership of Graanul Invest, the publicity-shy Estonian producer of wood pellets (more on that here). This week has started with the news about Rigas Piensaimnieks SIA, a Latvian dairy products manufacturer, another chapter in Alta Capital stories.

Established in 1993, RPS achieved its position of being one of the leading dairy producers in Latvia in many respects because of its strong brands - Dzintars and Kārums. The latter, which translates as a “treat”, was originally the name of a chocolate-coated cottage cheese snack, enormously popular with the kids of 1990s, thus creating a whole generation of devoted consumers.

Apparently the strong brands attracted the interest from Alta Capital, which, among other things, was in the process of building a premium food producer of a regional caliber at that time. In May 2007 it was announced that Alta Capital had acquired 80.07% of shares in RPS, while the remaining 19.93% were picked up by Darby Overseas Investment via the Darby Converging Europe Mezzanine Fund (DCEMF). At the end of 2007 RPS reported revenues of EUR 38.8 million, EBITDA of 3.9 million and net profit after tax of EUR 0.5 million. The company’s interest bearing liabilities amounted to EUR 27.2 million.

When Alta ran into problems and started liquidating its portfolio of investments, the restructuring process resulted in DCEMF becoming the sole owner of RPS in 2010. With their DCEMF being in “active divestment mode” Darby has been looking for an exit from RPS for quite some time. Meanwhile, it had not only succeeded in paying off a significant portion of debt but also managed leveraging off the Kārums brand over a whole range of dairy products targeting its loyal customer base who have grown up by now and make the consumption choices themselves.

On Monday this week the management of RPS and of Food Union confirmed the rumours that had started appearing in the public domain by announcing that Meridian Capital, a financial partner of Food Union, has agreed to acquire RPS and that the application has already been submitted to the Competition Council. Neither the size of consideration, nor any other specifics of the transaction have been released.

According to its financial statements for 2014, RPS has reported revenues of EUR 32.9 million, EBITDA of EUR 2.4 million and net profits after tax of EUR 0.7 million. Its interest bearing liabilities of almost EUR 9.0 million, although still fairly high, nevertheless remain under the level of 4.0x EBITDA threshold.

Food Union has not filed its financial statements for 2014 yet. After the acquisition of ice cream and frozen foods business lines from Premia Foods AS last fall (more on that here) we estimated the revenues from Mr Andrey Beskhmelnitsky’s assets in the Baltics increasing to EUR 213 million and EBITDA – to EUR 3.7 million. Provided that the price paid for it was not too high, RPS with its fairly complimentary product line might become another nice building block towards creating a Baltic food sector leader.

(c) mergers.lv

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