The Slovenia Times

Change of Strategy in Slovenian Biggest Retailer


The biggest shareholders of Mercator, foremost among them big banks, plan to make a renewed push to offload a majority stake in the retailer after the previous attempt to sell failed late last year.

But Balažič cautions that the company needs to be whipped into shape first. "Mercator is simply not ready for sale, as it is grappling with problems on the market, high debt and a lack of focus. If the shareholders want to maximise their profit, the management must prepare it for sale."

The management believes that EUR 60-80m can be saved over two to three years with measures such as improving cost effectiveness, purchasing, logistics and the management of working capital.

One key measure will be monetising real estate by selling shopping centres and leasing them back. The plan, estimated at EUR 1.7bn, has been around for years but the new management has decided to break the sale up into smaller chunks in order to attract a broader circle of real estate funds.

"This year's monetisation plan involves two tranches worth EUR 250m total, which represents a quarter of Mercator's debt and over half of its current market capitalisation," Balažič noted.

Mercator is currently trading at EUR 122 on the Ljubljana Stock Exchange, but Balažič says this does not reflect its true value. "I'm convinced that the potential is much greater, which is also indicated by offered prices in the recent past," he said in reference to last year's EUR 221 per share bid by Croatian rival Agrokor.

One of the reasons that Mercator has not performed so well in the past is that the management was busy with constant procedures involving the sale of the company. "I believe that stable and long-term ownership is crucial," he says.

The company wants to become No. 1 in the Balkans, but Balažič notes the competition is fierce, with Mercator and Croatia's Agrokor pitted against Belgian Delhaize. "The competition among us will be interesting and important." he says.

Balažič was tight-lipped about Q2 results, but he said the plans drawn up by the previous management would be "difficult to achieve" considering the weakness of the economy and lower household purchasing power. "Nevertheless, we are confident the second half of the year will be better than the first."


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