The Slovenia Times

Mercator Management Unhappy with Agrokor


This means that it was not possible to reach an agreement with a consortium of buyers, which originally also featured the EBRD, the IFC and One Equity Partners, the management said in a press release.

The news comes after the London-based ING bank, which is handling the sale on behalf of the sellers - beverage group Pivovarna Lasko and a consortium of banks -, said on Tuesday that the Croatian food group was the only buyer.

Mercator said it was not able to strike an agreement which would protect the interests of the Mercator group due to the absence of key contracting parties. The agreement is a condition for support for the procedure of the sale of a 52.1% stake.

According to the retailer, the agreement would protect Mercator's financial stability, jobs and rights of workers, guarantees, confidential data and other interests related to procedural aspects, such as due diligence at the company.

The retailer is ready to re-examine the possibility to express support for the sale procedure if either the EBRD or the IFC becomes a buyer of shares from the consortium of owners, as it was originally planned.

In case that the EBRD and/or the IFC want to become a direct owner of a major stake in Mercator, the management is ready to enable the investors to carry out full due diligence of operations and financial state of the group, the press release says.

Mercator added that the presence of the EBRD and the IFC as international financial institutions in the consortium was one of the key facts that had led the management to start discussing support to the sale to Agrokor.

As the company wants to speed up the sale procedure, it will publish by 5 December more data on its real estate and credit portfolio, and will carry out on 1 January 2012 an appraisal of its entire real estate stock. An audited report for 2011 will be ready by the end of February.

Parliamentary parties are divided in their response to the decision, with the People's Party (SLS), National Party (SNS) and Pensioners' Party (DeSUS) welcoming it and saying that Mercator must not go into "Croatian hands".

DeSUS president Karl Erjavec said that his party would not support the sale even if Mercator was taken over by a consortium, adding that the retailer was of strategic importance for Slovenia and the country's food industry.

SNS president Zmago Jelincic added that the potential takeover of Mercator by Agrokor would be a "speculative takeover", as the Croatian buyer would be buying a Slovenian flagship company.

The Social Democrats (SD), Liberal Democrats (LDS) and Zares meanwhile said that the sale was being carried out by a consortium of banks and not politics, and that Mercator was in a majority private ownership.

The LDS said that Mercator should find a stable and serious owner which would make sure that the company grows and develops. "We think that the future owner should make commitments to keep jobs," the party said in a press release.

Mercator also seeks an agreement with the banks and Lasko that would address risks related to the refinancing of obligations to the banks in the seller consortium, as some of them are Mercator's biggest financial partners.

Pivovarna Lasko is selling a 23.34% stake and a total of 28.76% of Slovenia's leading retailer is being sold by banks Abanka, Banka Celje, Banka Koper, Gorenjska banka, Hypo Alpe Adria, NKBM and NLB, and investment funds NFD 1 and NFD Holding.

The NLB bank, which holds a 10% stake in Mercator and is the unofficial coordinator of the bank consortium, said it would continue negotiations with Agrokor and the partners EBRD, IFC and One Equity Partners.

The chairman of the board of directors of the SKB bank, Cvetka Selsek, who represents the Societe Generale bank as financial adviser of Mercator, said that Mercator wanted the EBRD and/or IFC among its owners as they brought financial stability, neutrality and safety.

This is why the Mercator management is willing to allow them to carry out full due diligence, while Agrokor would be allowed due diligence only in a limited scope, as Mercator "cannot open up its books to its biggest direct rival on the market".

"This would be illegal after all," Selsek noted. She added that the sellers could carry on with the sale procedure, but that they have to be aware that "it is unlikely that the sale will succeed if the mentioned international institutions are not in."

An advisory body of the Ministry of Agriculture, Food and Forestry unanimously welcomed the management's decision, saying it was against the sale to Agrokor as this would significantly decrease the opportunities for the Slovenian food industry to place its products on the market.


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