HK RUOKATALO TO ACQUIRE BUSINESS OF SWEDISH MEATS - ARRANGEMENT GIVES RISE TO LEADING NORTHERN EUROP
HK Ruokatalo Group Oyj STOCK EXCHANGE BULLETIN, Nov 10 2006, 8.00am
HK RUOKATALO TO ACQUIRE BUSINESS OF SWEDISH MEATS - ARRANGEMENT GIVES RISE TO LEADING NORTHERN EUROPEAN FOOD COMPANY HK Ruokatalo Group and Swedens largest meat company Swedish Meats have agreed on a substantial arrangement in which HK Ruokatalo Group will acquire the entire business of Swedish Meats. The acquisition will make HK Ruokatalo Group a food company active in eight Northern European countries and generating a turnover of some EUR two billion for which the companys Board of Directors proposes the name HKScan. The transaction is slated for completion by the end of January 2007. It is subject to the approval of the decision-making bodies of both parties. For purposes of the transaction, Swedish Meats cooperative will incorporate its business into a limited company by the name of Scan AB, whose capital stock HK Ruokatalo Group will then acquire in full. Scan AB will become a wholly owned subsidiary of HK Ruokatalo Group. The purchase price of the stock is ca. EUR 113 million (SEK 1,050 million). The purchase price will be paid with a private placement of 4,843,000 HK Ruokatalo Group Series A shares to Swedish Meats and a cash payment of ca. EUR 60 million (SEK 557 million), which will be financed through a bank loan. In connection with the acquisition, HK Ruokatalo Group assumes liability for Swedish Meats debt, which in June 2006 amounted to a net of approximately EUR 185 million or SEK 1.7 billion. An additional purchase price of ca. EUR 9 million (approx. SEK 80 million) will be paid over the next five years provided that certain Swedish Meats membership loans of equivalent value are repaid to Scan AB. The goodwill arising from the transaction is provisionally estimated at approximately EUR 12 million according to the situation at 30 June 2006. The Board of Directors of HK Ruokatalo Group plans to convene an Extraordinary General Meeting of Shareholders in December for the necessary decisions to be taken. The share issue will make Swedish Meats cooperative the second-largest shareholder in HK Ruokatalo Group with a holding of ca. 12.3 percent. The arrangement expands HK Ruokatalos operations to Sweden. According to CEO Kai Seikku, increased company size will boost competitiveness and market leadership in the Baltic region. The new company will be able to provide more versatile and efficient service to retail and consumers alike. The arrangement will put the number of the Groups production plants at 36, located in six countries, and bring its workforce to some 10,200 employees. The new Groups business will be carried out by HK Ruokatalo Oy in Finland, the future Scan AB in Sweden, AS Rakvere Lihakombinaat and AS Tallegg in the Baltics and Sokolów S.A. in Poland. The Group will have leading brands in all its markets. The formation of HKScan is a major step in terms of further development of HK Ruokatalo Group, CEO Kai Seikku estimates. The companies have no geographical overlaps. The future development of the operations of Scan AB, continuing to do business in Sweden, will be governed by the same profitability criteria and other financial targets applied by HK Ruokatalo Group in steering its operations. The efficiency measures already introduced by the owners and management of Swedish Meats together with very strong market position and the strong Scan brand put us in an excellent position to deliver profitable performance in the near future. Moreover, the arrangement creates a strong player that can pursue further growth in Northern Europe also through acquisitions, Seikku continues. Swedish Meats is the largest meat industry company in Sweden, holding a 65 percent share of slaughter and 40 percent share of meat processing in Sweden. Its brands Scan and Pärsons are among the most recognised food brands in Sweden. Owned by 22,500 Swedish livestock farmers, the company has 17 production plants and some 3,500 employees. Its main consumer products are sausages, sandwich fillings, bacon, consumer packaged meats and convenience foods. In 2005, turnover at Swedish Meats was EUR 964 million while adjusted operating profit came to EUR 7 million. Turnover in the previous year was EUR 901 million, generating EUR 10 million in adjusted operating profit. Balance sheet total at the end of 2005 was EUR 364 million and the equity to assets ratio stood at 31%. The figures for the previous year were EUR 365 million and 30%, respectively. Swedish Meats turnover in the first nine months of 2006 was EUR 788 million while adjusted operating profit came to EUR 8 million. Turnover in the comparable period in 2005 was EUR 697 million and adjusted operating result came to EUR -1 million. At the end of September 2006, the balance sheet total was EUR 439 million and the equity to assets ratio stood at 27%. The comparable figures at 30 September 2005 were EUR 364 million and 29%, respectively. The pro forma turnover in 2005 of HK Ruokatalo Group and Swedish Meats combined was EUR 1,847 million and adjusted operating profit EUR 36 million while the combined turnover in the first nine months of 2006 was EUR 1,480 million and adjusted operating profit was EUR 37 million. Combined pro forma turnover broken down by market in January-September 2006: Swedish Meats 53%, Finland 30%, Poland 10%, Baltics 7%. Breakdown of pro forma adjusted operating profit in the same period: Finland 44%, Baltics 21%, Swedish Meats 21% and Poland 14%. The years 2007 and 2008 will be a time of reorganisation in which investments and one-off expenses may be expected. Synergy benefits will be sought over geographical borders particularly in raw material and material purchases, production, new product development and product innovation, commercial activities and the integration of administration and support functions. HK Ruokatalo Group is an international food company with operations in Finland, Estonia, Latvia, Lithuania, Russia and Poland. Its best-known brands in Finland are HK and Kariniemen. In 2005, the Group had a turnover of EUR 883.3 million while operating profit came to EUR 24.1 million. The Group has some 4,300 employees in Finland and the Baltics and its Polish joint venture Sokolów employs another 5,000 persons. ABN AMRO acted as financial adviser to HK Ruokatalo Group in the transaction. HK Ruokatalo Group Oyj Kai Seikku CEO Further information is available from: - CEO Kai Seikku and CFO Matti Perkonoja at HK Ruokatalo Group Oyj. Please leave any messages for them to call with Katja Backman on +358 (0)10 570 2428 - CEO Magnus Lagergren, Swedish Meats, tel. +46 70 255 52 35 Press briefing in Finland: Media, investors and analysts are invited to a press briefing on the matter to be held in Helsinki today, Friday 10 November 2006 at 10.30 a.m. at Savoy Restaurant (floor 7), address Eteläesplanadi 14, 00130 Helsinki. Present at the briefing will be CEO Kai Seikku of HK Ruokatalo Group, Chairman of the Board of Directors of HK Ruokatalo Group Marcus H. Borgström and CEO Magnus Lagergren of Swedish Meats. Persons wishing to attend the briefing are kindly requested to notify HK Ruokatalo, Corporate Communications Marja Siltala at +358 (0)10 570 2290. Press briefing in Sweden: The press briefing in Sweden will be held at 2.45 p.m. Swedish time at the head office of Swedish Meats, Slakthusplan 4, Johanneshov (Stockholm). Persons wishing to attend are kindly requested to notify Ms Maud Kedegren +46 8 725 8111. Presentation material will be available later in Finnish and English on the HK Ruokatalo Group website www.hk-ruokatalo.fi DISTRIBUTION: Helsinki Exchanges Main media www.hk-ruokatalo.fi