The second half of 2000 in the Latvian business world was dominated by an unprecedented acquisition, following which several cases are pending before the courts. The operations of the leading Latvian sweet producers involved in the matter - Staburadze and Laima, which both have long traditions of sweet-manufacturing and which are renowned both at home and abroad for the quality of their confectionery - have been hindered by the legal disputes.

On November 2000 Latvia's second largest sweet producer, the joint stock company Staburadze, acquired 100% of the company NTBDC L, which in turn owns 73.2% of Latvia's largest sweet producer, the joint stock company Laima. According to the Law on Securities, where a legal or natural person acquires more than one-half or three-quarters of the shares in a particular joint stock company, that person is obliged to make a mandatory offer to buy out the minority shareholders. However, Staburadze made no such offer following the acquisition.

The Financial and Capital Markets Commission subsequently issued a decision ordering Staburadze to comply with the law and to make an offer to the minority shareholders. Staburadze did not comply with this request. As a result, on August 16 2001 one minority shareholder requested the court to enjoin all shares and financial means belonging to the chairman of Staburadze's council, G Reinison, and his partners, in order to secure the minority shareholder against losses which he may suffer due to their actions.

In addition, on September 20 the court satisfied the request of another minority shareholder to enjoin property of Nordic Food (Staburadze's largest shareholder), Staburadze, Laima, Reinison, the chairman of the board of directors of both Laima and Staburadze, and another member of Laima's board of directors. In response, Staburadze submitted a collateral claim to court requesting damages from the minority shareholder. As the Riga Stock Exchange received no information from Staburadze reflecting its financial condition and that of its affiliates, and its intentions regarding the minority shareholder buy-out, the quotation of Staburadze shares in the official listing of the Riga Stock Exchange was suspended on September 21 2001.

Further developments in this case are expected at the end of the year, when a court hearing will be held on Reinison's complaint against the Financial and Capital Markets Commission's decision.

For further information on this topic please contact Filip Klavins or Dagnija Libane at Klavins & Slaidins by telephone (+371 703 5222) or by fax (+371 703 5252) or by email ([email protected] or [email protected]).