Kesko Food s And ICAs Joint Venture Starts Operating In The Baltic Countries

Rimi Baltic AB, the joint venture owned 50/50 by Kesko Food Ltd, a company belonging to Kesko Group, and ICA Baltic AB, a company belonging to the Swedish ICA Group, starts operating in the Baltic countries today. The parties have today signed the final agreements concerning the arrangement and their grocery operations in Estonia, Latvia and Lithuania have been transferred to the joint venture.

Kesko Food Ltd and ICA Baltic AB have transferred their Baltic grocery operations in accordance with the agreed valuation principles to Rimi Baltic AB, a Swedish limited company operating as an independent joint venture. The book value of Kesko Group s assets relating to Baltic grocery trade operations is approximately 110 million euros, of which approximately 90 million euros are transferred to the joint venture.

The joint venture leases from Kesko Group the real estate properties remaining in Kesko Group s ownership in Estonia, which represent a book value of approximately 20 million euros. In addition, Kesko Food contributes 4.5 million euros to the joint venture.

The equity of Rimi Baltic amounts to 140 million euros. Kesko Food s 50% share in Rimi Baltic is consolidated line by line in Kesko Group s figures as from 1.1.2005. The arrangement does not have any immediate significant effect on Kesko Group s profit.

The result of this arrangement is a strong operator in the Baltic food market. In 2004, the combined net sales of Kesko Food s and ICA s Baltic operations were approximately 690 million euros. The joint venture s total number of personnel in Estonia, Latvia and Lithuania is approximately 8,300 and its main office is located in Riga, Latvia.

Rimi Baltic operates hypermarket, supermarket and discounter concepts. At the initial stage the company has approximately 160 stores, but the plan is to develop and expand the store network in all countries of operations. The objective is to reach market leadership in the area and a 25% market share in three years. The company aims at a positive operating profit in 2007.

The company s hypermarkets are based on ICA s Rimi store type, on which Kesko Food s existing Citymarkets in Estonia and Latvia will be remodelled during the spring. The chain s name will be Rimi Hypermarket. The supermarkets will be modelled on ICAs Rimi Supermarket concept and the chain s stores will operate under the name Rimi The discount stores are based on Kesko Food s Säästumarket and SuperNetto concepts and will continue as Säästumarkets in Estonia and as SuperNettos in Latvia. Plans have been made to expand the SuperNetto chain into Lithuania where the parties have not operated discounters earlier.

A centralized logistics and distribution organization will be established for the company to manage and maintain the network of distribution centers in all of the Baltic countries. A major logistics unit is located in Riga and local units near Tallinn and Vilnius.

Antonio Soares, ICA Baltic ABs current CEO, has been appointed as the CEO of Rimi Baltic AB and Seppo Hämäläinen, Vice President of Kesko Food s Baltic Operations, has been appointed as the Deputy CEO. Ton Nolet, ICA Baltic ABs CFO, has been appointed as the CFO of the joint venture.

Kesko Food s President Kalervo Haapaniemi is the Chairman of the joint venture s Board of Directors and ICAs President Kenneth Bengtsson is its Deputy Chairman. The Board will be chaired alternately, for periods of one year, by Kesko Food and ICA representatives.

The agreement on setting up the joint venture was signed on 8 June 2004 and announced in a stock exchange release.

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