On 7 June 2023, AB Kauno Grudai, owned by AB Linas Agro Group, signed a share purchase and sale agreement with the shareholders of the cooperative company Grybai LT for the acquisition of 100% of this company's stock. Negotiations on the acquisition of the shares of Grybai LT were conducted based on a letter of intent concluded on 7 March 2023 between AB Kauno Grudai and Baltic Champs, UAB, the owner of the stock of Grybai LT.
The transaction will only be completed subject to clearance by the Competition Council of the Republic of Lithuania, the consent of Grybai LT's financing bank, and the fulfillment of other customary conditions precedent to such transactions.
The final purchase price of Grybai LT shares will be calculated for the closing date according to the formula set out in the agreement:
Purchase price = EUR 17,000,000 (i.e. the value of the Grybai LT shares fixed by agreement between the parties)
minus Grybai LT's net debt (i.e. the difference between Grybai LT's financial debts and its cash and cash equivalents)
plus the difference between the Grybai LT's base net working capital (EUR 1,601,176.51) and the net working capital as at the closing date
minus all Grybai LT's costs related to the transaction.
According to Linas Agro Group's valuation, the purchase price is expected to be up to 2% of Linas Agro Group's assets.
Grybai LT, a cooperative company based in Širvintos with over 40 employees, is active in producing and selling ready meals. The company operates a modern robotic factory covering an area of around 3,600 sq meters. The main products produced are ready-to-eat organic soups, curries, cereal meals, and organic vegetables in packets - around 70 product names. The annual production is 8-9 million packets of various products exported to more than 30 countries. Grybai LT's revenue in 2022 was EUR 7.1 million, consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) was EUR 1.3 million, and assets were EUR 7.9 million.
The acquisition of Grybai LT would be particularly significant for Linas Agro Group in the way that it would supplement the production of the Group's companies with organic food products and provide an opportunity to open new markets for other products produced by the companies of the Group. According to Linas Agro Group's estimates, over a period of 5-6 years, this acquisition, with additional investments, would increase the EBITDA of AB Linas Agro Group by 5-10%.
"Our ambition is to grow by diversifying our activities, and the most attractive seems to be expansion in the food segment. We have not yet had any ready-to-eat product groups in our range, nor have we had any organic food products. Following the acquisition of Grybai LT, we will expand our product range with three new product groups. Organic products will not only complement our product range perfectly but will also take us into markets such as the US and Japan, where Grybai LT has made significant inroads. We see an opportunity to increase production and an evident synergy with our other activities," says Darius Zubas, Chairman of the Board of Linas Agro Group.
The AUGA brand is not being purchased. The production facilities, recipes, and contracts with buyers are. And although the company is called Grybai LT(eng. mushrooms), it is not engaged in the mushroom growing or processing business.
"We are not new to the consumer food segment and have popular brands. However, until now, we have not had an organic food offer. We expect to cooperate with organic vegetable growers in Lithuania and maintain an organic product line under a different name. We can also produce private-label products for our customers according to their preferences - not just organic.
While obtaining the company, we already think about expansion. The European market is huge and attractive: around 1.8 million tons of soups and 1.3 million tons of ready meals are consumed annually. Grybai LT can currently produce around 3 thousand tons, so the prospects for growth are high. Over the next 5-6 years, we plan to invest an additional EUR 4.4 million to expand maximum production capacity to 33 million packets or 11 thousand tons per year, and to increase annual EBITDA from EUR 1.3 million to EUR 6 million", says Andrius Pranckevicius, Deputy Chairman of the Board of AB Linas Agro Group and CEO of AB Kauno Grudai.
According to A. Pranckevicius, it is the synergy with other activities that will highlight the value of this acquisition.
"Grybai LT will fit perfectly complement the business scheme and activities of Kauno Grudai, the company's production will open new markets for other products manufactured by Kauno Grudai. For example, the USA is a dream market, as over 1 million tons of soups alone are consumed annually, but it usually takes years to enter and establish oneself. We hope to see not only organic soups but also our other products on the shelves in the US.
Grybai LT currently sells around 20% of its production in the EU. Meanwhile, our noodles are already well established in the EU market, working with 30 of the EU's largest supermarket chains, and we hope to be able to successfully sell soups, curries, and other meals in packets there. We see an opportunity to increase production to 24 hours a day and to sell new products on the EU market to those customers who already buy our porridges and noodles," says Pranckevicius.
The shares in Grybai LT are sold by the cooperative companies AgroMilk, Juodmargelis, Šventosios Pievos, also UAB Baltic Champs, and UAB AUGA Luganta, all of which together own a 100% stake in Grybai LT. Two of the latter sellers are owned by the public company AUGA group, while the others are also related to this company through shareholders.
"We are delighted to be able to put the business we have developed in good hands. The new owners of Grybai LT will be able to use their experience and synergies with their other activities to expand in the existing markets and to reach even more export markets, creating value for the company, its employees, and the Lithuanian economy as a whole," says Kestutis Jušcius, General Manager of the AUGA group.
AB Linas Agro Group was represented in the transaction by the law firm Norkus ir Partneriai COBALT, and the companies selling the stake by the law firm WALLESS.
About AB Linas Agro Group
AB Linas Agro Group employs almost 5 thousand people in a group of 70 agribusiness and food companies. The Group's financial year starts on 1 July. The Group's consolidated revenue for the nine months of the 2022/2023 financial year exceeded EUR 1.5 billion, with a net profit of EUR 25 million.
Additional information will be provided by:
Andrius Pranckevicius, Vice-Chairman of the Board of AB Linas Agro Group
Mob. +370 687 71 419
E-mail a.pranckevicius@linasagro.lt
CFO of Linas Agro Group AB Mažvydas Šileika
Mob. +370 619 19 403
E-mail m.sileika@linasagro.lt
