IKEA Group's Ingka Investments Secures Approval for 18,000 Hectares of Estonian Forest from Södra

Major Forest Acquisition Approved in Estonia

Ingka Investments, the investment arm of the IKEA Group, has officially received permission to acquire 18,000 hectares of forest land in Estonia. The acquisition is from the Swedish-owned company Södra Forest Estonia, a subsidiary of the Swedish forest owners' association Södra. This move is a component of a broader strategy by Ingka Investments to bolster its sustainable raw material supply chain in the Baltic region. The Estonian Competition Authority granted its approval for the deal on a recent Friday.

Details of the Baltic Deal

The Estonian acquisition is part of a significant transaction valued at €720 million (approximately SEK 8 billion), which encompasses a total of around 153,000 hectares of forest land across both Latvia and Estonia. The majority of this land, approximately 135,000 hectares, is located in Latvia, with the remaining 18,000 hectares situated in Estonia. Of the Estonian land, about 90 percent is classified as forest land. This marks Ingka Investments' largest forest-based acquisition to date.

Strategic Motivations for Both Parties

For Ingka Investments, the acquisition aligns with its long-term strategy to secure a reliable and sustainable supply of raw materials for IKEA's furniture production. The company aims to strengthen local value chains in the Baltic region and increase the proportion of wood processed locally. Tauno Kusma, forestland country manager at Ingka Investments Estonia, stated, 'Our goal is to increase the proportion of wood processed in the region in order to strengthen the Baltic forestry value chain.' Ingka Investments also emphasizes its commitment to responsible forest management and contributing to regional economies.

Conversely, Södra's decision to divest its Baltic forest holdings is part of a strategic shift to concentrate on managing forests owned by its 50,000 members in southern Sweden. This move is intended to enhance the profitability and long-term competitiveness of its core operations. Lotta Lyrå, President and CEO of Södra, was quoted saying, 'As a forest owners' association with more than 50,000 members in southern Sweden, our mission is focused on our members' forests – not on owning forest abroad.'

Market Impact and Future Outlook

The transaction is subject to further regulatory approvals, particularly in Latvia, concerning foreign direct investment. While the acquisition is substantial for Ingka Investments, the impact on Estonia's overall forest market is expected to be limited, as the 18,000 hectares represent approximately 1 percent of the total managed forest land in the country. Once finalized, this deal will significantly expand Ingka Investments' footprint in the Baltics, making it Latvia's largest private forest owner.