0IR4 Auga Group Ab

Correction: AUGA group, AB subsidiaries signed a share sale agreement of the Kooperatinė Bendrovė "Grybai LT" with Akcinė Bendrovė "Kauno grūdai"

AUGA group, AB supplemented the announcement with the calculation formula for the sale price of shares and other information.

On 7 June 2023, AUGA group, AB subsidiaries Baltic Champs, UAB, UAB “AUGA Luganta“, Kooperatinė Bendrovė “AgroMilk“, Kooperatinė Bendrovė “Juodmargėlis“ and Kooperatinė Bendrovė „Šventosios pievos“ (hereinafter the Seller) have signed an agreement with AB Linas Agro Group controlled Akcinė Bendrovė Kauno Grūdai (hereinafter - the Buyer) concerning the sale of 100% of the shares of the Kooperatinė Bendrovė “Grybai LT“ (hereinafter the Company). Negotiations regarding sale of the shares of the Company were conducted on the basis of the letter of intent signed on 7 March 2023 between the Buyer and the main member of the Company Baltic Champs, UAB.

The transaction will be completed only if the permission of the Competition Council to carry out the concentration is obtained, the consent of the bank financing the Company and other preconditions usual for such transactions are met.

The sale price of the Company's shares will be calculated for the closing date in accordance with the formula set out in the agreement:

Sale price = EUR 17,000,000 (i.e. the value of the Company shares fixed by agreement between the parties), minus Company's net debt (i.e. the difference between Company's financial debts and its cash and cash equivalents), plus the difference between the Company's base net working capital (EUR 1,601,176.51) and the net working capital as at the closing date, minus all Company‘s costs related to the transaction.

The Company was established in 2012 to process mushrooms grown in Lithuania. Since 2016, the Company has been producing ready-to-eat products such as soups, canned vegetables, etc. in a modern automated factory and has been continuously expanding its product range. Company's revenue in 2022 was EUR 7.1 million, net profit was EUR 0,8 million, assets were EUR 7.9 million.

The completed transaction will significantly improve the results of AUGA group, AB and its subsidiaries in 2023. The exact selling price of Company's shares will be calculated on the day of completion of the transaction, however, AUGA group, AB estimates that by selling the Company, it will increase the consolidated net profit of AUGA group, AB by 7-8 million EUR.

"We have successfully created and developed a completely new business segment, and a category of ready-to-eat soups, which was almost non-existent in Lithuania, even though we were not food processors and had no experience in food production before. We started from scratch - from the idea to the selection and implementation of the necessary production technologies, to the development of products and search for new markets. Thanks to our team and its consistent work, today the Company's products are available in 30 countries around the world. We are pleased that we have managed to attract the attention of consumers not only in Lithuania, but also to enter the world's leading markets for organic products such as: United States of America, Germany, Japan, and to establish ourselves in them", - said Kęstutis Juščius, CEO of AUGA group, AB.

The Company's soups and other end-consumer-products are marketed under the AUGA brand and private labels. Although many consumers associate the AUGA brand with these products, the Company's end-consumer-products account for only up to 10% of the total revenues of AUGA group, AB and its subsidiaries.

"Although the products have been successful and recently the Company that produces them has been growing its turnover by around 30% annually and has been profitable, we have taken the decision to exit and sell this well-developed business. Over the last 2-3 years, AUGA group, AB and its subsidiaries have found a way to tackle the largest sources of emissions in agriculture through technology. By solving them, a new category of sustainable food with "no cost to nature" is created. These products will be made exclusively from raw materials grown on farms that apply AUGA sustainable farming standard. The new dairy and cereal products under the 'mission no cost to nature‘ label are already available to consumers in Lithuania. In the future, we will seek to expand abroad not by exporting packaged products (as produced by KB Grybai LT), but by providing technology and working with local farmers and processors to bring the products with no cost to nature to consumers in other countries. AUGA will create and develop a new category in food and will become synonim for sustainable food," says Kęstutis Juščius, CEO of AUGA group, AB.

AUGA group and its subsidiaries plan to further expand the range of the new "no cost to nature" product line and continue building the AUGA brand.

"We believe that the sustainable food category is several dozen times bigger than the one the Company has been producing so far, and AUGA is demonstrating leadership in it," adds Kęstutis Juščius, General Director of AUGA group, AB.

Consumers will still be able to find their favourite soups, canned vegetables and other food products on the shelves, but in the future these products will be branded not under AUGA but different brand name.

Commenting on the transaction, Darius Zubas, Chairman of the Board of Linas Agro Group, said: "Our ambition is to grow by diversifying our activities, and the most attractive seems to be the development in the food segment. We have not yet had any ready-to-eat product groups in our product range, nor have we had any organic food products. Following the acquisition of Grybai LT, we will expand our product range with three new product groups. Organic products will not only complement our product range perfectly, but will also take us into markets such as the USA and Japan, where Grybai LT has made significant inroads. We see an opportunity to increase production and clear synergies with our other activities."

"We are delighted to be able to put the business we have developed in good hands. The new owners of the Company will be able to leverage their experience and synergies with their other activities to expand in the existing markets and reach even more export countries, creating value for the Company, its employees and the entire Lithuanian economy", - says Kęstutis Juščius, CEO of AUGA group, AB.

The proceeds from the transaction can be used for:

• general corporate purposes of AUGA group, AB and its subsidiaries;
• partial coverage of AUGA group, AB and its subsidiaries' obligations;
• augmentation of the working capital of AUGA group, AB and its subsidiaries;
• financing approved projects in the strategy of AUGA group, AB and its subsidiary companies.

As the transaction has not yet been approved by third parties (the Competition Council), and as the operations of AUGA group, AB and its subsidiaries are subject to market fluctuations in production prices and weather conditions affecting harvest results, the issuer will take a final decision on the use of the proceeds of the final transaction in the third quarter of 2023.

Following the closing of the transaction, AUGA group, AB will disclose the exact use of the proceeds of the transaction after taking into account all the circumstances at the time and the results of the 2023 harvest.

AUGA group, AB and its subsidiary companies prioritize the implementation of its strategy. In the field of food products for consumers, the focus will be on creating and developing new sustainable product category. The management of AUGA group, AB and its subsidiary companies expects that by concentrating both financial and human resources on core activities, the best results will be achieved, and market share will be captured in food categories that are much bigger than previous ones. Moreover, as previously announced, the AUGA group, AB subsidiaries plan to raise new capital and additional funding for the development and expansion of the technology branch.

Chief Executive Officer Kęstutis Juščius +370 5 233 5340