The news became public only last week when Gemaga, a Kaunas-based Lithuanian wholesaler of tea, coffee and related products, announced that it had acquired 100% of shares in Inteka SIA, a Latvian producer of tea and wholesaler of tea and coffee, for an undisclosed consideration.

Established in 1999, Inteka is best known for its proprietary Možums tea brand. Apparently it is also a private label producer of tea for RIMI and Maxima, the two leading retailers, in the Baltics, and has an estimated one third market share in Latvia.

Inteka has not filed its financial statements for 2014 yet (the deadline for most companies in Latvia for this is April 30) and the latest available balance sheet is as at the end of 2013. The company had reported sales of EUR 4,180 thousand, net profit after tax of EUR 197 thousand and earnings before interest, taxation, depreciation and amortisation (EBITDA) of 349 thousand. Its assets stood at EUR 2,559 thousand and shareholders’ equity amounted to EUR 1,408 thousand. The company’s interest bearing debt of EUR 503 thousand was still within the financially very conservative limits of 1.4x EBITDA.

Even less information is available about the acquirer. Gemaga’s revenues for 2013, as reported by media, have been EUR 2,800 thousand only. And they have not filed their 2014 financials yet either.

In absence of reliable recent financial information it is hard to estimate what the transaction price might have been. But, given the size of the acquirer and considering that the former shareholders of Inteka are continuing as the management team after the acquisition, it is highly likely that the purchase price is heavily earn-out based and that it may have been funded from additional debt taken on by the target. But this is something that we will know for sure only in twelve months’ time when both companies have filed their 2015 statements.

Meanwhile, the acquirer has already articulated its aggressive vision on how it intends to fully utilise Inteka’s hidden potential and to double its sales over the next few years. Achieving this might require quite a lot of tea to be sold.

© mergers.lv