Retail

There is really only one thing that is clear about Pivovarna Laško's wish to sell its stake in Mercator, and that is the motivation behind it. The brewer is struggling with EUR 450m worth of debts - the majority of which are due in June, if media reports are to be believed - and is therefore on a desperate search for possible sources of capital. The sale of its 23.3 percent stake in Slovenia's leading retailer has long seemed like an obvious course of action to pursue.

Obvious, but far from straightforward. Last month, just as Laško was debating quite how it would sell its Mercator shares - alone, or in conjunction with five banks which are fellow owners - the Competition Protection Office banned the sale. The watchdog's decision is said to be based on actions at Mercator's 2009 annual general meeting; an event at which the CPO claims Laško acted in concert with NLB, NKBM, Abanka Vipa, Banka Celje, Gorenjska Banka and Banka Koper. The outcome, as far as the CPO is concerned, is that neither Laško nor the banks should be allowed to sell their stakes in Mercator without its prior approval.

Dismay and confusion

Within Laško, there has been dismay at the decision. It quickly filed a lawsuit with the Supreme Court saying that the ban put its urgent restructuring plans in jeopardy and that it would use "all legal means available to protect the interests of the owners, companies involved, and of the workers."

Some economists have also been appalled. Bogomir Kovač - a professor at the Faculty of Economics at the University of Ljubljana and a member of the Fiscal Council, an advisory body to the government - has described the move by the CPO as "unusual and irresponsible".

Home or away?

Daily newspaper Delo has concluded that the company is the hostage of competing interests. For there are few potential share sales which have generated as much attention as this one. Despite repeated and ongoing assurances from Prime Minister Borut Pahor that Slovenia is open to foreign investment and that all investors with fair intentions are welcome in the country, there has still been much opposition to the idea of Slovenia's leading retailer falling into foreign hands.

The firm has now decided to sell its shares in a consortium with fellow owners, and an announcement of this arrangement was expected by the end of May.

The concerns have intensified since the revelation that the best response to Laško's February call for bids on its stock came from Agrokor. The Croatian company owns several major food and beverage production companies and there have been fears that, were it to gain a stake in Mercator, shelf space for Slovenian products would be significantly reduced. These concerns have been backed up by Agriculture, Forestry and Food Minister Dejan Zidan who estimates that up to 40 percent of the food produced in Slovenia is sold on Mercator's shelves.

No clearer

It now seems that there is no longer a chance of Agrokor buying Laško's stake. The firm has now decided to sell its shares in a consortium with fellow owners, and an announcement of this arrangement was expected by the end of May. Even so, the deal is far from done. The CPO still has not lifted its ban on Laško and the banks selling Mercator shares without its approval, and the Supreme Court's ultimate verdict on the ban could take some time. In addition, it is expected it could take up to a year to find a buyer for the consortium shares. That's without factoring in the controversies likely to be caused if foreign competitors declare interest in the stake.

The consortium agreement is expected to state that the banks will aim to reprogramme their loans to Laško in a way which allows the group to bridge the period until a buyer is found. In the meantime the brewer has announced a cash injection plan which envisages a doubling of share capital. The management expects this will raise nearly EUR 70m in cash. And it is planning to sell its 100 percent stake in newspaper publisher Delo and an outright stake in fruit drink producer Fructal.
In spite of all these plans, there is no doubt that the firm is not yet out of the woods. And that the ongoing saga of the struggling brewer that wanted to sell some shares is far from reaching its conclusion.