M&A and Private Equity Legal Update - May 2011
  Dear clients and cooperation partners,

Since our last M&A and Private Equity Legal Update in August 2010, the Baltic economies have shown strong recovery from the crisis. GDP growth in Estonia, the newest euro zone member country, was as high as 8% in the first quarter of 2011 compared to the same quarter of the previous year, followed by similarly strong growth in Lithuania (6.8%) and Latvia (3.1%). We have also witnessed a significant increase in activity in both the M&A and Private Equity markets. Whilst our team is busy with many ongoing projects, this Legal Update brings you some of the recently announced or completed transactions where the SORAINEN team has acted as advisor. This Legal Update also brings you news about several draft laws in Latvia and Lithuania. When implemented, these should be good news for both local and foreign investors.

Due to the complicated economic situation in Belarus in the first half of 2011 we have seen less M&A activity compared to the rather turbulent 2010. There is also a market expectation that the current currency crunch will finally push Belarus to actual implementation of the privatisation plan and other proactive measures to solicit foreign investment.

The SORAINEN M&A and Private Equity Team has recently published a M&A and Private Equity Baltic Transaction Guide which gives high level insight into these transactions in the Baltic States. You can download the guide by clicking on the link at the end of the Legal Update.

Enjoy reading!

Yours sincerely,

Toomas Prangli
Partner, Regional Head of the M&A and Private Equity Team

Toomas Prangli

Toomas Prangli
send e-mail

Pärnu mnt 15
10141 Tallinn
phone +372 6 400 900
fax +372 6 400 901
Eva Berlaus

Eva Berlaus
send e-mail

Kr. Valdemāra iela 21
LV-1010 Riga
phone +371 67 365 000
fax +371 67 365 001
Laimonas Skibarka

Laimonas Skibarka
send e-mail

Jogailos 4
LT-01116 Vilnius
phone +370 52 685 040
fax +370 52 685 041
Maksim Salahub

Kiryl Apanasevich
send e-mail

ul Nemiga 40
220004 Minsk
phone +375 17 306 2102
fax +375 17 306 2079


Landmark deal: Citycon acquires Kristiine Shopping Centre
SORAINEN Estonia advised Citycon, one of the largest regional owners and operators of shopping centres and other retail premises, in acquiring the Kristiine Shopping Centre in Tallinn. The shopping centre with gross leasable area of 42,600 m2 is Tallinn's second-largest after Rocca al Mare, already in the Citycon portfolio. The approx EUR 105 million deal is a landmark transaction not only for being one of the largest real estate transactions ever completed in Estonia, but also as a sign of new vigour in the market after difficult times.

SORAINEN advised on all stages of the acquisition, assisting in initial negotiations, completing the legal due diligence review, preparing transaction documents, handling required corporate matters, obtaining merger clearance, and helping negotiate transaction signing and completion. Completing the transaction required arduous negotiations where a wide range of SORAINEN expertise proved necessary.

LOTOS Petrobaltic acquires Geonafta group in one of the biggest deals in Lithuania in 2010
SORAINEN Lithuania advised LOTOS Petrobaltic, a leading Polish oil exploration and production company and part of the LOTOS Group, in acquisition of a controlling stake in the Geonafta group, in one of the largest acquisitions in Lithuania during 2010-2011. The Geonafta group, the largest oil exploration and production group in Lithuania, includes Geonafta, Genčių nafta, and 50% stakes in Minijos nafta and Manifoldas, which together sold nearly 150 thousand tonnes of oil during 2009. SORAINEN advised the client throughout the acquisition process, including performing legal due diligence, assisting in preparation of acquisition and financing documentation as well as in negotiations and merger clearance. The acquisition process lasted for over a year and required considerable effort and input by lawyers.

BaltCap invests in TREV-2
SORAINEN Estonia advised BaltCap on its acquisition of a minority stake in TREV-2 Group, Estonia's leading road infrastructure construction company. BaltCap is the leading independent private equity firm focusing on mid-market buyout and expansion capital investment in the Baltic States.

Sale of majority stake in Baltkom to AXA Private Equity and Resource Partners
SORAINEN Latvia is representing Baltkom, Latvia's largest cable television operator, and its majority shareholder in the sale of a majority stake in Baltkom to AXA Private Equity and Resource Partners, the Central and Eastern European private equity adviser. SORAINEN was involved in the vendor's due diligence of Baltkom, drafting transaction documents and negotiating the transaction.

Baltic Beverages Holding acquires shares in OJSC Brewery Alivaria
SORAINEN Belarus advised Baltic Beverages Holding (a member of the Carlsberg Group, one of the largest brewery groups in the world), in acquisition of shares from minority shareholders in OJSC Brewery Alivaria, one of the largest breweries in Belarus. The USD 29.3 million (approx EUR 20.7 million), three-stage transaction resulted in increasing the BBH shareholding in Alivaria to 67% of ordinary voting shares. The transaction is one of the first major international share purchase deals in the Belarusian market implemented under the new legislation, which requires all share transactions to be performed at the Belarusian Currency Stock Exchange. SORAINEN provided comprehensive advice to the client, including merger clearance and tax advice.

Oriola-KD sells its healthcare trade business
SORAINEN advised Oriola-KD Corporation, a leading pharmaceutical wholesaler and retailer in Finland, Sweden, Russia and the Baltic States, in the sale of its healthcare trade business in the Baltics, Finland, Sweden and Denmark to Mediq N.V., an international provider of pharmaceuticals and medical devices. The EUR 85 million sale supports Oriola-KD's strategy to focus on the wholesale and retail pharmaceutical business. SORAINEN advised Oriola-KD on structuring and implementing the transaction in the Baltic States, in particular assisting with Lithuanian, Latvian and Estonian legal aspects of the master sale agreement, drafting documents for transfer of the businesses in the Baltics and closing the transaction.

Danone merges its CIS dairy operations with Unimilk
SORAINEN Belarus acted as local legal counsel for leading Russian dairy company Unimilk, Russia’s second largest manufacturer of dairy products and baby food, in the merger of its business with dairy world leader Danone's Fresh Dairy Product businesses in the CIS area. Spanning operations in Russia, Ukraine, Kazakhstan and Belarus, the merger covers all dairy products and makes Danone-Unimilk the leader in dairy products throughout the CIS. The new entity will generate annual sales of approximately EUR 1.5 billion and have over 18,000 employees.

Inspecta privatises Tehnokontrollikeskus from the Estonian State
SORAINEN Estonia advised Inspecta Group, the leading provider of inspection, testing and certification services in the Nordic area, in the privatisation of Tehnokontrollikeskus, a state-owned company providing mainly technical inspection and conformity assessment services. Inspecta won a public auction held by the Estonian Ministry of Economic Affairs and Communications. The EUR 2.3 million acquisition significantly strengthens Inspecta's operations in Estonia, as Tehnokontrollikeskus is the market leader in Estonia for inspecting pressurised equipment, electrical devices and electrical installations, boilers and tanks.

Primekss obtains EUR 1.4 million financing from JEREMIE funds
SORAINEN  Latvia represented  Primekss,  a  leading  European  industrial  flooring  specialist,  in  obtaining  an investment of EUR 1.4 million from BaltCap, one of the two investment funds in Latvia managing JEREMIE (Joint European Resources for Micro to Medium Enterprises) funds. JEREMIE is a joint initiative launched by the European Commission and the European Investment Bank group to improve access to finance for small and medium size enterprises (SMEs) in the European Union for the period 2007-2013.

MolPort obtains JEREMIE investment
SORAINEN Latvia represented MolPort, a company operating a global web portal for the sale of chemical compounds, in obtaining seed investment from Imprimatur Seed Fund, one of the two investment funds in Latvia managing JEREMIE funds. This is one of the first closed transactions for investing JEREMIE funds in Latvia.

Acquisition of Vilniaus Pergalė by Mieszko
SORAINEN  Lithuania   advised  Mieszko,   a  major   Polish  confectionary  producer,   on   its  acquisition  of  100%  of the  shares in TB Investicija, which controls Vilniaus Pergalė, a Lithuanian confectionary producer, and several other subsidiaries. SORAINEN performed legal due diligence of TB Investicija and its subsidiaries, drafted the share purchase agreement, obtained merger clearance from the Lithuanian Competition Council and provided other related transaction advice. Valued at EUR 31.86 million, it was the third largest acquisition in Lithuania in 2010 by value.

MarkMonitor acquires anti-piracy company DtecNet
SORAINEN Lithuania advised MarkMonitor, a global leader in enterprise brand protection with offices in San Francisco, Boise, Washington D.C., New York and London, in the acquisition of anti-piracy company DtecNet. DtecNet is an international company with an operations centre in Vilnius, Lithuania and a development team in Denmark. Acquisition of DtecNet brings to MarkMonitor expertise in pinpointing and monitoring illegal download activity on P2P networks, blogs, video streaming sites and Usenet services. SORAINEN advised the client throughout the acquisition process, performed legal due diligence of the target company in Lithuania and assisted in preparing transaction documentation.

SIG acquires shopping centre operator in Grodno
SORAINEN Belarus advised Signature Investment Group (SIG), a global investment firm with offices in New York and Tel Aviv specialising in real estate development, on its acquisition of Korona, operator of the largest retail trade centre in Grodno, Belarus. The total area of the trade centre is approx 20,000 m² and is almost entirely leased to 800 tenants. This is SIG's first investment in Belarus. SORAINEN provided full transaction assistance to the client, including initial corporate and investment advice, preparing transaction documents and support in merger clearance and transaction closing.


On 14 April 2011, the Latvian Parliament approved draft amendments to the Latvian Commercial Law at the first reading. The amendments simplify the merger procedure in certain cases, and if passed will bring positive changes to company reorganisation processes. The amendments are not yet law, as the second reading is still to follow.

Under the amendments, joint stock companies involved in reorganisation will no longer need to prepare reorganisation prospectuses if all stockholders agree not to prepare the document. This extends to joint stock companies a possibility currently available only to private limited liability companies. Likewise, no reorganisation prospectus will be necessary when a company performs a merger by acquisition of a 100% owned subsidiary.

Moreover, with permission of all shareholders the companies involved in a reorganisation will no longer be obliged to prepare financial statements for the reorganisation, which currently is a rather heavy burden in reorganisation in terms of both cost and time. Likewise, no financial statements will be needed if the company publishes its semi-annual accounts in accordance with the Financial Instruments Market Act.

Companies involved in a reorganisation will be entitled to publish the reorganisation prospectus, the financial statements (if required) and other reorganisation documents on their internet homepages. The current requirement of making these documents available to all shareholders in paper form at the legal address of the company will apply only if documents cannot be published on the Internet for some reason.

The draft amendments also affect reorganisations where a company carries out a merger by acquisition of a subsidiary in which it holds at least 90% of shares (stocks), but not all of them. Under the proposed legislation, the management board of the acquiring company can decide about the reorganisation without convening a shareholders’ meeting. This, however, does not apply if within a specified term (not shorter than a month) shareholders representing 1/20 or more of the acquiring company share capital request convening a shareholders’ meeting to review the draft reorganisation agreement and vote on the reorganisation.

No shareholders’ meeting will be needed in the company being acquired either, and the management board will be able to make the reorganisation decision (which to a large extent will be formal). However, shareholders owning 10% or less of the acquired company’s shares (stocks) may request the acquiring company to buy out their shares two months after the reorganisation has been finalised and registered with the Commercial Register.

Additional information:
Eva Berlaus Alisa Šurko
Office Managing Partner Associate
eva.berlaus@sorainen.com alisa.surko@sorainen.com


The Latvian Ministry of Economics has proposed amendments to the Latvian Competition Law which would change merger control thresholds for the fourth time since 2008. The proposed legislation would require merger clearance in all cases where the participants’ combined market share exceeds 40%, even if individual turnover in Latvia is below the current threshold of LVL 1.5 million (approx EUR 2.1 million).

Under the Latvian Competition Law currently in force, a concentration of market participants has to be notified to the Competition Council of Latvia, and the respective merger clearance must be obtained if:

  • the participants’ combined turnover for the previous financial year in the territory of Latvia has been LVL 25 million (approx EUR 35.25 million) or more; or
  • the participants’ combined market share in the relevant market exceeds 40%.

However, notification is not required if the turnover of one of the two participants in a concentration (including its affiliated companies and subsidiaries) for the previous financial year in the territory of Latvia has not exceeded LVL 1.5 million, or if one of the parties to the concentration is not a market participant in Latvia.

Nevertheless, the Latvian Ministry of Economics is of the opinion that the present regulation does not prevent an undertaking from establishing or strengthening its dominant position in Latvian industries with small turnovers. On the contrary, currently a dominant undertaking may acquire smaller competitors having turnovers of under LVL 1.5 million practically without restrictions and as a result become a dominant supplier of particular goods within a certain region. Therefore, the ministry proposed requiring merger clearance in any case where the concentration participants’ combined market share in the relevant market exceeds 40%, even if the turnover of one of the two participants in the concentration has not exceeded LVL 1.5 million.

The proposal, which is pending for the second reading, would result in stricter merger control by increasing the number of reports to be reviewed. However, frequent changes to merger clearance criteria regulation make the legal environment unpredictable and show lack of a stable competition law policy in Latvia.

Additional information:
Eva Berlaus Zanda Brakša
Office Managing Partner Associate
eva.berlaus@sorainen.com zanda.braksa@sorainen.com


A cross-institutional action group led by the Lithuanian Securities Commission, where SORAINEN also participates, has prepared draft legislation (the New Legislation) on Collective Investment Undertakings Intended for Informed Investors (CIUII). The New Legislation aims to create a more competitive and favourable regulatory and tax environment for the private equity (PE) industry in Lithuania, in line with best international practices. The general objective is to promote foreign PE investment in Lithuania and increase Lithuania’s attractiveness as a jurisdiction for establishing PE funds.

Significant proposals under the New Legislation include the following:

  • CIUIIs will be able to act through a wider range of corporate forms than currently available (including an investment fund managed by a management company or an investment company established as a public company, private company or partnership).
  • The scope of persons qualifying as informed investors is expanded.
  • The capital requirements for setting up a management company are significantly reduced.
  • The requirements for investment objects and investment portfolio diversification are simplified, allowing CIUIIs to invest in various financial instruments and other assets.

Meanwhile, the action group continues to discuss various proposals for optimising the tax regime, which include the following:

  • Establishing a “full exemption” regime (ie no gain from investment would be taxed unless it is distributed to investors) for CIUIIs.
  • Exempting gains or dividends which foreign investors receive from CIUIIs from taxation in Lithuania (so that gains or dividends would be taxed only in the investor’s country of residence).

The proposed changes would also affect application of the existing Collective Investment Undertakings Act (the CIU Act). Under the New Legislation, the CIU Act provisions would cease to apply as regards CIUIIs as of 1 January 2012. Proposed amendments to the CIU Act provide for a transition period for CIUs intended for professional investors and established prior to the date the New Legislation comes into effect. Such CIUs established for a definite period will have a choice whether to act under the CIU Act or convert to IICIUs under the New Legislation, whereas undertakings established for an indefinite period will be required to adjust their activities under the New Legislation by 1 January 2012.

The draft New Legislation is expected to be considered by the Lithuanian Parliament by mid 2011.

Additional information:
Laimonas Skibarka Augustas Klezys
Partner Senior Associate
SORAINEN Lithuania SORAINEN Lithuania
laimonas.skibarka@sorainen.com augustas.klezys@sorainen.com


The SORAINEN M&A and Private Equity Team has produced the M&A and Private Equity Baltic Transaction Guide 2011, covering the following topics:

  • general overview of the Baltic markets;
  • types of acquisition;
  • regulatory requirements;
  • key issues in private equity transactions;
  • capital markets – key issues related to acquisition of shares in publicly traded entities; and
  • taxation.


Chief Editor:
Toomas Prangli

You have received this e-mail with the M&A and Private Equity Legal Update because you are in the SORAINEN database. If you are not interested in receiving our M&A and Private Equity Legal Update in the future, please reply by clicking here.

Please note that this legal update is compiled for general information purposes only, free of obligation and free of legal responsibility and liability. It does not cover all laws or reflect all changes in legislation, nor are the explanations provided exhaustive. Therefore, we recommend that you contact SORAINEN or other legal advisor for further information. Electronic versions of SORAINEN legal updates are available and can be subscribed to on the SORAINEN website – www.sorainen.com.

All rights reserved