The Slovenia Times

Mercator Insists on Conditions for Takeover


The management of Slovenia's leading grocer suggested possible alternative ways of protecting the interests of the company and its employees in the takeover by Mercator's biggest competitor in the region in a letter to the consortium selling a 52.1% stake in Mercator.

"There are some important restrictions by the competition protection legislation regarding the disclosure of confidential and sensitive information to the biggest competitor," the management says in the letter posted on the website of the Ljubljana Stock Exchange.

The management offers to make public all confidential information that would be disclosed to Agrokor so it could carry a limited due diligence, as well as to publicly list the requests for confidential information disclosure that are non-compliant with the relevant legislation.

Despite assurances by the consortium of sellers that the EBRD, IFC and One Equity Partners will finance the takeover and be involved in the management of Mercator after the deal is completed, the management says that the institutions have not taken any binding decisions to be involved in the next stage of the transaction.

Since the management believes that Agrokor as the sole buyer cannot "vouchsafe for the financial stability after the transaction", it proposes three possible alternative approaches to protect interests of Mercator Group.

One is getting the formal approval by EBRD or IFC of their direct immediate involvement in negotiations to reach an agreement aimed at protecting the interests of Mercator and ultimately become a party to such agreement together with Agrokor.

The second alternative is that all the parties wait until Agrokor carries out a limited due diligence on the basis of additional information published by Mercator, and then the EBRD and /or IFC are directly included in the negotiations on the protection of Mercator's interests and the conclusion of appropriate agreements.

If the EBRD and IFC decline such involvement, the management proposes that the agreement aimed at protecting Mercator's interest be signed by at least one reputable and solid financial institution, for example a bank which is currently an important shareholder of Mercator and has the interest to sell its stake.

Such financial institution can be a contractual party of the agreement aimed at protecting the interest for its entire duration of such agreement or only temporarily until the EBRD and/or IFC enter into it, the management suggests.

In support of the sale process, the management is meanwhile prepared to enable full due diligence to the EBRD and/or IFC and direct contact with those two institutions. Further suggestions include real estate appraisal as on 1 January 2012 and an earlier deadline to publish the audited annual report for 2011.

Meanwhile, a report in business daily Finance claims that circles close to Mercator that are against the takeover by Agrokor have come up with an idea that the state-run KAD fund could buy up to 25% in the grocer from the budgetary funds initially earmarked for subscription for fresh shares to the NLB bank.

Based on Agrokor's non-binding bid, Finance estimates that KAD would need up to EUR 208m to buy the stake, while EUR 243.4m is available in the mentioned budget item. KAD sold its stake in Mercator in 2005 to Istrabenz, which has since declared insolvency and been subject to court-mandated debt restructuring.

KAD and Agrokor would not comment on the speculation, but Finance cites sources close to the Croatian company in saying that Agrokor has already received an invitation for a meeting with KAD, which has been withdrawn after the management of Mercator withheld its support for the sale.


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