Swedish market leader ICA has agreed to acquire Lithuanian grocery retailer IKI for €213m, making ICA’s Rimi Baltic fascia the second largest grocery retailer in Lithuania. The deal is subject to approval from local competition authorities and this is expected to be confirmed by Q4 2017.
ICA had lowest share in largest Baltic market
Commenting on the development, ICA CEO Per Strömberg said, ‘Lithuania is the largest market in the Baltic region, but also the country in which Rimi Baltic has had the lowest market share. This implies a quick upscaling of the business and enables significant cost synergies. IKI is characterised by well-developed stores with a high service level and a broad assortment. Moreover, IKI’s store network is a good complement to Rimi’s existing store network'.
Combined business to benefit from cost synergies
ICA advised that the acquisition will result in annual ‘cost synergies of approximately 15 million euros when fully realized in 2020’, driven by ‘increased purchasing volumes, more efficient logistics and marketing’.
What does this mean for Rimi Baltic?
The acquisition will significantly extend Rimi Baltic’s store presence in Lithuania, with it currently operating 56 stores in the market, while IKI operate around 230 stores. Rimi Baltic’s focus is on hypermarkets and supermarkets in cities, while IKI’s portfolio will add a high number of supermarkets, including a small number of premium supermarkets and convenience stores.
In 2015, Rimi Baltic in Lithuania achieved sales of €288m, while IKI achieved sales of €597m. Market leader Maxima should retain its market leadership position achieving sales of €1.44bn excluding VAT in 2015, while the new combined ICA-IKI business would become the second largest grocery retailer in the market.
Despite this, competition in Lithuania has also intensified as Lidl entered the market recently, with around 20 stores currently in operation, eight of which are located in and around the capital of Vilnius. Lidl has also introduced its new concept store of the future concept as seen elsewhere in Europe and plans to invest €60m in the market next year.
Image source: Diena.lt