Balticovo weighs three potential acquisitions - CEO

Interview 4 October

Balticovo weighs three potential acquisitions - CEO

Balticovo, a Latvian egg producer, is looking at three potential acquisition targets, CEO Vladimir Mkhitaryan told Mergermarket.

The targets are egg producers in the Baltics and one unspecified foreign market, Mkhitaryan said, adding that Balticovo is likely to announce one deal in the near term. The company involves financial and legal advisors on a case-by-case basis, he added.

It is receptive to new target proposals in the egg business, he said, naming Poland as a market of interest going forward. The company would assess targets of various sizes, especially if they bring synergies or help to increase its efficiency through processes and logistics, Mkhitaryan said.

Balticovo, which anticipates sales of more than EUR 90m this year, annually spends around EUR 10m from its own resources and bank loans for its investment projects and acquisitions, Mkhitaryan said. In case it finds a deal valued at more than EUR 10m, it would explore acquiring the target together with private or financial investors, in exchange for an unspecified stake in the target company, he said.

Balticovo does not consider opening its own equity for external investors, he added.

Mkhitaryan told this news service in January 2021 that Balticovo was in talks with four unnamed targets in different European countries. None of those deals materialised. In one of the cases Balticovo’s price offer was below seller’s expectations. Moreover, management was not able to visit some of the targets due to the travel restrictions in relation to the global COVID-19 pandemic at the time, Mkhitaryan said.

Meanwhile, the Lithuania-based egg producer Lit Egg, which is managed by Balticovo, agreed to acquire local feed producer Ariogalos Grudai for an undisclosed consideration in August, as reported. The buyside was advised by Balva-SV on financial matters and Ellex on the legal side, Mkhitaryan said.

Balticovo is indirectly controlled by private investor Mkhitar Mkhitaryan and his family, with a third of the shares held by the chairman of the company's supervisory board Valdis Grimze, as reported in 2021. The CEO is the nephew of the majority owner, also as reported. In late 2019, Balticovo and its majority-owner Mkhitaryan jointly bought the above-mentioned Lit Egg. Mkhitar Mkhitaryan holds a controlling stake in Lit Egg, and Balticovo has a 30% stake, as reported.

Lit Egg is a good example of how Balticovo could approach acquisitions in the new markets, as that business has direct investment and management team support from Balticovo, but it also has an investor, which is also Balticovo’s majority shareholder, the CEO said.

Balticovo sales stood at more than EUR 60m in 2021, he said, adding it is yet to announce its audited results. The company is growing thanks to various investments it made over the past few years, which are estimated at a total of around EUR 40m, he said.

Among its ongoing investment projects is replacing its Daugavpils-based cage farm to a free-range birds unit, the CEO said, adding that it already has two free-range units in Latvia. In 2021, Balticovo announced that it will transition to cage-free egg production by 2026, with investments for reconstruction of existing and building new farms estimated at EUR 30m, according to a press release.

The company, which has 330 employees, has also invested in an egg grading unit, an egg boiling facility, a packaging warehouse, as well as in grain and feed facilities in recent years, the CEO said. Balticovo produces 700m eggs per year and exports around 70% of its production.

Founded in 1972, Balticovo offers fresh eggs; liquid, boiled, and dried egg products; and ice cream, according to its website.

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