Due to continuing complicated situation in Ukraine and Russia, reducing Eastern-European risks became a priority. Company considered different scenarios for Ukraine and decided to change its model of operation on the market. Management began looking for a partner with knowledge about the complicated Ukrainian market to whom the current Ukrainian retail business could be sold and with whom a long-term franchise agreement could be signed to continue operating.
On 29 April 2014 Baltika signed an agreement by which Baltika Retail Ukraina Ltd (BRU) was sold to Osaühing Ellipse Group. The owner of the company is Boriss Loifenfeld, who was Baltika’s adviser in Eastern European matters. BRU will continue as Baltika’s franchise partner and cooperation agreement was signed on 29 April for the next five years.
Baltika sold BRU’s assets and liabilities for a price that approximates BRU’s carrying amount and after the transaction Baltika has receivable from BRU of 1.25 million euros, for which five-year settlement schedule has been agreed. The receivable is secured with movables pledge on BRU assets but its collectability depends on the development of the Ukrainian economy and improvements in the entity’s operating results.
In the first quarter, prior to sales transaction, Baltika revalued the Ukrainian assets completely down (in the amount of 1,095 thousand euros) and Baltika will keep this impairment as allowance reserve for BRU receivable.
Due to the aforementioned the transaction has no significant impact on Baltika’s balance and income statement.
As Baltika confirms that the above-mentioned transaction does not constitute a transaction with a related party and the members of the Supervisory and Management Boards of AS Baltika do not have any other personal interest in the transaction.
Baltika Retail Ukraina Ltd that was established on 3rd September 2013 net sales in 2013 were 1,649 thousand euros and net profit 28 thousand euros. AS Baltika confirms BRU has no court or arbitration proceedings which may have a significant effect on the business activity.
Maigi Pärnik
Member of the Management Board
maigi.parnik@baltikagroup.com