Mercator takes over rival grocer
Slovenia's largest retailer, Mercator signed a contract on 15 November to take over rival Tuš. The value of the deal has not been disclosed but media reports value it at €30 million.
The subject of the contract is 100% stake in Engrotuš, the retail and wholesale business of Tuš, a brand started as a family business decades ago that later run into trouble.
The transaction is still subject to regulatory approval. If allowed, Mercator and its Croatian owner Fortenova will control some 35% of Slovenia's retail market.
Mercator holds roughly 25% of the market and operating some 460 stores, while Engrotuš holds some 10% with about 260 stores.
Mercator bought Engrotuš from the Tuš family, which owned 20% in the business and remains the owner of the Tuš group's cosmetics stores, and the Alfi Fund, which owned 80% but remains the owner of real estate.
Mercator outbid German Rewe
The newspapers Delo and Finance reported that Fortenova and Mercator outbid the German retail store Rewe to buy Engrotuš.
"By taking over Tuš we have demonstrated our commitment to the Slovenian market," Fabris Peruško, CEO of Fortenova, said after the signing of the contract in Ljubljana.
He said the takeover was consolidating their position as the largest regional retail network, while at the same time it meant they were meeting the commitments they made when they absorbed Mercator in 2021.
"After the Franca chain in Montenegro, the integration with the Tuš retail network is the second major expansion of our retail network in a very short period of time this year," Peruško said.
He said the deal meant greater stability for employees and suppliers.
On behalf of the sellers, Tuš Holding and AH Invest 1, Tuš group head Andraž Tuš said that "after several months of negotiations, we have decided to sell to the buyer we believe is the best choice for our employees, business partners and the development of the company's core business".
He also expects positive effects for the Slovenian economy.
Mercator CEO Tomislav Kramarić said Mercator was experiencing steady organic growth and the acquisition would help it meet its business goals. He is confident the deal is in interest of everyone.
Concerns about takeover
However, Slovenian Economy Minister Matjaž Han, responded to the news with concern. "In the current situation, when these two retailers dominate such a large part of the market and when we do not yet know what will happen with [Ivica] Todorić's lawsuit against Croatia over Agrokor, I do not scream with joy at the news of this takeover," he told Delo.
He was referring to the dispute between Todorić, Agrokor's former owner, and the Croatian state, which bailed out Agrokor to see its healthy revived as Fortenova in 2019.
The International Centre for Settlement of Investment Disputes recently rejected the Croatian government's appeal and accepted Todorić's lawsuit against Croatia for restructuring Agrokor under emergency administration.
Han expects the competition watchdog to do its job when it comes to protecting consumers from the new retail giant's excessive market share.
Agricultural economist Aleš Kuhar from the Ljubljana Biotechnical Faculty described the deal as a surprise that does not give much reason for excitement. He believes that the arrival of a new retailer that would bring new practices, "something fresh", to Slovenian retailing would have been better news.
Mercator's takeover of Engrotuš also raises the question of whether a certain number of stores will need to be closed, as Mercator will have to undertake restructuring, Kuhar added. He also said that Mercator and Tuš are compatible in many respects.
The newspapers Delo and Finance reported that neither retailer was in very good financial condition. Mercator, which was sold by the state to Agrokor in 2014, is yet to issue its 2022 business report, but Delo says that data accessible in Gvin, a business database, indicates a loss of €10.4 million.
The core company generated €1.26 billion in revenue last year, up 3% over 2021, while its operating profit dropped by a fifth to €24.4 million, according to Delo.
Meanwhile, Engrotuš generated €480.7 million in revenue last year, up 4.6% over the year before. Its operating profit dropped from €9.1 million to €1.7 million.
The company reported a net loss of €6.3 million, compared to a net profit of €4.3 million in 2021. According to its website, Engrotuš has 2,600 employees.
Demise of Tuš empire
The Tuš brand was created in 1989, when Mirko Tuš launched his first store in Slovenske Konjice. During the company's heyday, Mirko Tuš was the wealthiest Slovenian for a number of years.
Retail has remained the group's core business throughout, but Tuš later branched out into hospitality and real estate. In the past, it was also a multiplex cinema operator, a mobile telecommunications provider and a fuel retailer.
The global financial and economic crisis brought out a number of problems at the group, which led it to sell some of its assets, while parts of the group were restructured. In 2020, the Alfi Fund became 80% owner of the group by buying up outstanding claims.