The Public Agency of the Republic of Slovenia for the Protection of Competition (Javna agencija Republike Slovenije za varstvo konkurence (AVK)) passed a decision on December 16th, 2019 whereby it has temporarily seized the shares of Mercator d.d. from Agrokor d.d. Unprecedented in the working practice of this Slovenian regulatory agency to date, this decision amounts to an expropriation of the private property of Agrokor d.d. by way of an interim seizure of Mercator shares, without any underlying court decision and with no valid legal justification.
The seizure is based on a disproportionate, non-final penalty in the amount of EUR 53.9 million, as well unprecedented in the practice of this regulator. This penalty, imposed by AVK in September 2019 in relation to a concentration case, has been appealed by Agrokor. The non-final penalty is clearly disproportionate since the company in question, Costella d.o.o., generates only slightly more than EUR 1 million in revenue yearly. This company was acquired by Ivica Todorić, ie. Agrokor AG from Switzerland, back in 2016.
The seizure of Mercator shares is in itself also largely disproportionate, since the shares in question have an appraised value of in excess of EUR 140 million, and the appealable penalty – that is being contested – is in the amount of EUR 53.9 million.
Moreover, according to AVK’s explanation, the interim measure of seizure of Mercator d.d. shares was passed pursuant to the Misdemeanor Act, in particular the provisions of that Act which in their essence apply to traffic offences or similar offences, which are discovered in flagranti, committed by foreign nationals – natural persons in the Republic of Slovenia.
Therefore, Agrokor considers this act of seizure of shares as a gross, intentional misapplication and misuse of law, committed by a state regulatory body that is supposed to enforce the national laws and whose head officers are appointed by the Parliament of Slovenia as the supreme legislative body of the country.
By way of background, the Misdemeanor Act which has been applied in this case to seize shares, essentially provides for the possibility of interim seizure of the driver’s license or car from a foreign national who was for example driving too fast, for as long as the fine is not paid, as there is a reasonable likelihood that the accused may escape, which would result in possible non-payment of the fine. The core pre-conditions that must be satisfied under the Act in order for a temporary seizure to be imposed, are that the infringer would either escape abroad or seek to hide himself. However, it goes without saying that neither of these pre-conditions can be fulfilled with respect to a validly existing foreign legal entity (given that such an entity can neither “run away” nor can it “hide itself”). In addition, the purpose of the law is to provide immediate protection. The written resolution has to be served on the infringer within 3 hours and the courts should decide on the appeal within 48 hours, whereas in the case at hand AVK waited for two months to seek temporary seizure, which in addition casts doubt on AVK’s intentions.
Although AVK has in its practice to date never seized any property from anyone as a means of security for a payment, let alone pursuant to the Misdemeanor Act, which has been in force since 2006, in the current case, by inadequately applying that law, it has now seized Agrokor d.d.’s 69.57 per cent share in Mercator d.d., allegedly as a means of security for paying the non-final penalty in the amount of EUR 53.9 million, against which Agrokor has sought court protection based on firm arguments.
By way of reminder, due to not having reported the concentration of the companies Agrokor AG and Ardeya Global Ltd., AVK passed a decision on September 24th, 2019 imposing a fine in the amount of EUR 53.9 million on Agrokor as legal person and EUR 5.000 for the accountable (natural) person. According to AVK’s explanation, by that concentration Agrokor acquired a 100 per cent share in the company that owns the Slovenian company Costella d.o.o. and was, pursuant to the Slovenian Competition Act, allegedly obliged to report the concentration within 30 days of signing of the takeover agreement. As such a report was not filed, on April 9th, 2019 AVK instituted proceedings to assess the concentration ex officio.
Agrokor has both publicly and directly explained that it considers this decision of the AVK to be completely unsubstantiated, since all decisions related to the above described acquisition were made and executed solely by Ivica Todorić alone, without the knowledge or participation of any other member of the then Management Board of Agrokor d.d. and thus the acquisition had nothing to do with Agrokor d.d., but with Agrokor AG from Switzerland, which has not been under control of Agrokor d.d., but was initially run solely by Mr. Todorić and since 2017 by an administrator/commissioner appointed by the Swiss court, who in October 2019 sent the concentration form to AVK on behalf of Agrokor AG.
Furthermore, the decision of AVK imposing the EUR 53.9 million fine is not final, as Agrokor filed a request for court protection against it, which was submitted to AVK on November 8th, 2019. But AVK has unexplainably not yet forwarded this request for court protection, filed by Agrokor, to the competent County Court of Ljubljana in order to allow the court to decide on the request for court protection and has instead by its own decision, without participation of the court, on December 16th, 2019 initiated the temporary seizure of Mercator d.d. shares owned by Agrokor d.d.
To put the disproportionality of the AVK ruling imposing a fine on Agrokor in the amount of EUR 53.9 million, as well as of the seizure of Mercator shares as alleged security for the collection of that fine into context, it is important to note that Costella d.o.o. is a company that globally generates only slightly more than EUR 1 million of revenue per year. This fact clearly indicates how disproportionate the magnitude of the fine imposed by the AVK is, let alone the seizure of Agrokor’s Mercator shares. It is also worthwhile mentioning that back in 2006, when the Misdemeanor Act was undergoing the Slovenian Parliamentary procedure, the Parliaments’ legislative and legal body expressly warned about the possibility that in some instances seizures under the law might be significantly disproportionate.
As regards the magnitude of the fine, by way of comparison, the European Commission fined Canon EUR 28 million for not having reported a concentration by which it acquired control of Toshiba Medical Systems and has previously in similar circumstances fined Electrabel EUR 20 million with respect to its acquisition of Compagnie Nationale du Rhône, where the acquired company had generated at least EUR 25 million in not less than three countries, otherwise the European Commission would not have been involved in the first place.
Historically, the AVK has never imposed a fine of more than several hundred thousand euros. In fact, its previous highest fine ever in the context of acquisitions and takeovers amounted to around EUR 150.000 (belated concentration report), while the fine for Pop TV in the amount of EUR 4.9 million was later declared null and void by the court in the judicial part of the misdemeanor procedure.
The above arguments, individually and collectively, clearly indicate that AVK’s ruling on the fine is unsubstantiated and the Extraordinary Administrator of Agrokor has to express serious concerns that the ruling has only been passed to serve as a means to expropriate Mercator shares.
The seizure of Agrokor’s Mercator shares was executed without any court decision, pursuant to a law that as a rule applies mostly to traffic offences. Such actions, irrespective of the final outcome, render Slovenia exceptionally insecure for foreign investors and call into question Slovenia’s commitment to compliance with Article 63 of the Treaty on the Functioning of the European Union, which ensures that the fundamental principle of European Union of the free movement of capital between EU Member States is respected, and certain provisions contained in the European Convention on Human Rights, including the protection of private property.
We have today informed the Embassies of all EU member states in Slovenia, as well as the US and Russian Embassies, given the origin of the key investors in Agrokor, of the aforesaid facts. The Extraordinary Administrator of Agrokor shall continue to protect the company’s property with all available legal means.
„Besides the package presented by the Croatian Prime Minister containing 30 groups of articles for which price ceilings have been set, Fortenova Group, and primarily Konzum, will set the total value of the list of 365 articles published by the Ministry of Economy back to the total value as of 31st December last year, effective today. Apart from that, Konzum will start an additional discount on another 1000 articles today. We will thus invest EUR 10 million in prices on an annual level” – announced Fabris Peruško, Fortenova Group’s CEO and Member of the Board of Directors. He added that, since one year already, meat, edible oil and milk from the production companies PIK Vrbovec, Zvijezda and Belje were listed among the products with price caps, while the Government’s new, extended list contained additional articles from those companies.
Zoran Mitreski, CEO for Retail at Fortenova Group and President of the Management Board of Konzum, pointed out that the price discounts on 1000 articles will range from five to 40 percent, depending on the group of products, and the prices will be locked until year end. “We have strived to include almost all product groups that we sell – 50 percent from food, 50 percent from non-food, and it is important to note that our suppliers have supported this drive and that Konzum’s investment in prices until the end of this year will amount to around EUR 3.5 million” – Mitreski said.
All prices will be transparently published on Konzum’s website. Commenting on the Croatian Government’s fifth package of measures designed to help the Croatian citizens, Fabris Peruško said that Fortenova Group welcomed any initiative intended to lower inflation, with all Fortenova Group companies in Croatia taking part this time again. “As already mentioned when the first package was adopted, we as a company are aware of our influence in the society and want to support the Government’s efforts to restrain inflation”.
At Google’s best known conference – Google Next 2023 in San Francisco, Fortenova Group was presented with two awards for its achievements in the Google Cloud ecosystem – the Retail Industry Customer Award and the Talent Transformation Award. On behalf of Fortenova Group the awards were accepted by Dragan Mrkajić, Fortenova Group’s Director of Data & AI Strategy.
Fortenova Group has thus, among a large number of Google Cloud platform users worldwide, been recognized for its achievements in the successful application of advanced analytics and artificial intelligence in its operating companies – Konzum Croatia, Mercator Slovenia and Mercator Serbia, all with a view to developing leading technological solutions in the retail industry.
“The „Google Cloud Customer Awards“ are an opportunity to acknowledge the most innovative, technically most advanced transformative cloud implementations across all industries, from all over the world, built on our platform”, said Brian Hall, Vice President for Product and Industry Marketing at Google Cloud. “I would like to congratulate Fortenova Group for winning this award, proving itself as the leading innovator in the industry.”
The prestigious award for users in retail bears witness to the exceptional use of the Google Cloud technology in forecasting demand for fresh products, assortment optimisation and maximising the efficiency of promotional activities, which eventually drives growth and customer satisfaction. This is, of course, accompanied by the strategic management of teams and talents, as witnessed by the award won for talent transformation. This is a recognition of the successful initiatives focused on addressing challenges in building a talent team for the realization of the most demanding analytical solutions on the markets of Central and Eastern Europe.
“We would like to thank Google Cloud for the partnership. This awards are but an additional incentive in realizing our goal for machine learning and artificial intelligence to provide us with the maximum value of data available in all our companies. This will significantly speed up our decision making process, make it possible to quicker verify the value of our business ideas and as a result – change and improve our business models to the benefit of all our customers” – commented Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors.
By using data analytics and machine learning, Fortenova Group’s DataLab as the Center of Excellence for artificial intelligence for the entire Group has worked on models of product assortment and promotion strategy optimisation and the improvement of fresh product demand forecasting capabilities. It has been proved that artificial intelligence solutions can generate significant business value.
Thus, through a number of A/B tests conducted in the retail operations in Serbia, the Advanced Promo Optimizer AI module has shown an increase in the promotion margin by approximately 0.5 points. The Assortment Recommender AI modul, tested in more than 60 stores in Croatia, has shown a gradual increase in sales of 1-3 percent in the tested categories, while the fruit and vegetables forecasting model shows a profitability improvement of approximately 8 percent in 65 percent of the stores through the reduction of waste and product stockouts. The model is currently implemented in more than 500 stores in Croatia.
“These achievements reflect the joint efforts of our retail companies and the Fortenova Group DataLab, in which we have successfully recruited a new team of data scientists, for a successful entry on the global scene. With data and artificial intelligence in the center of our operations we are excited about what is lying ahead, as we will continue to provide innovative solutions and form the future. Congratulations to the whole team”, said Bojan Radlović, Fortenova Group’s Chief Digital Officer.
In accordance with the strategic direction of the company’s further development, Fortenova Group’s Board of Directors decided to additionally strengthen the management teams at Fortenova Group and some of its operating companies. Joining the team of strategic directors are thus Gordana Fabris, as Group Executive Director of Human Resources and Hido Lajtman, in the position of Group Executive Director for Legal Affairs and Compliance.
When it comes to changes in the operating companies, Tomislav Bagić, former President of the Management Board of Tisak, has become new member of the Management Board of Konzum in charge of operations, Helena Klarić, so far President of the Management Board of MultiPlusCard, has assumed the position as President of the Management Board of Tisak, while the Management Board of MultiplusCard will be headed by Bojan Radlović, who will, along with his new position, continue to manage Fortenova Group’s digital operations as Director of Digital Transformation.
„With all these management changes, along with the focus on the Group’s business development, we wanted to additionally enhance the overall organisation. We are proud of the internal advancement of our high-quality managers who have already proved themselves with their work and results so far. We have been working together for years and all of them – from Gordana and Hido to Tomislav, Helena and Bojan – are committed and dedicated managers who know the system and Group values, the teams they are heading as well as all our comparative advantages and challenges really well. Their past contributions to our joint efforts in raising the Group’s operational excellence are a guarantee that in their new roles and responsibilities they will be even more committed to creating added value for all our employees, customers and partners. I wish them all a lot of success and excellent results in their future work”, Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors commented on the changes.
Gordana Fabris has since 2018 been in the position of Fortenova Group’s Director of Human Resources. Over that period, she has implemented a number of projects focused on supporting the business strategy and the priorities of Fortenova Group’s operating companies, which include strategic planning and employee development, rewarding systems, organizational change management as well as the overall organization and management of all other functions of Human Resources. She gained her previous professional experience in several industries – from the FMCG market to insurance and sales, and in the period from 2003 to 2017 she was responsible for the human resources management function in the Valamar hotels and resorts and at Valamar Rivijera. She holds a degree in psychology from the University of Zagreb and graduated from the EMBA studies of the Cotrugli Business School in Zagreb in 2014. She won the Best HR Manager Award in 2012 as well as two awards for Best HR Practices.
Hido Lajtman started his professional career at the former Agrokor in 2008, where he worked in different positions within Legal Affairs until 2015. From 2015 to 2019 he served as Director and Executive Director in Legal Affairs. With the commencement of Fortenova Group’s operations he assumed the position of Director of Legal Affairs and Compliance. Over the course of his professional career at Agrokor and Fortenova Group he has managed the legal team that negotiated and developed the creditors’ settlement plan, realized the financing at the time of the Extraordinary Administration and the refinancing in the amount of more than EUR 1 billion with international creditors. He ran the legal process for the Frozen Food Business Group divestment and was one of the sponsors of the legal aspects of both Agrokor’s original takeover of Mercator as well as Fortenova’s final takeover of 100% of Mercator which was completed in 2021. Hido Lajtman graduated from the Law School of the University of Zagreb in 2007 and passed the bar exam in 2011.
Tomislav Bagić, former President of the Management Board of Tisak, has transferred to the Management Board of Konzum, to the position of Board Member in charge of operations. He started his professional career as regional retail manager at Konzum d.d. and in 2009 he joined Mercator-H d.o.o., where he first served as Director of Retail and then as Executive Director of Retail, Wholesale and Logistics, to become Member of the Management Board of the company in 2013. From 2016 to 2018 he was President of the Management Board of Konzum d.o.o. Bosnia and Herzegovina. He joined Tisak in 2018 as Member of the Management Board and became President of the Management Board in 2019. Over the last four years under his management, along with the primary focus on the customer, Tisak has digitalized and developed its operations with numerous innovative services and projects, enabling it to keep its position as the leading kiosk retail chain.
Helena Klarić, new President of the Management Board of Tisak, has joined Tisak from the position of President of the Board of MultiPlusCard, Croatia’s largest loyalty programme. Over the period of only three years at MultiPlusCard, she made a great stride in digitalizing its operations with the new omnichannel loyalty platform and the extension of the programme with new partners and functionalities for all users. Prior to that, from 2009 to 2020 she was Assistant Director for the areas of retail and investments at Konzum. From 2003 to 2008 she worked at the Nielsen market research agency. Helena Klarić graduated from the Faculty of Electrical Engineering and Computer Science and holds a postgraduate degree in management (DSM).
Bojan Radlović is the new President of the Management Board at MultiPlusCard. Bojan holds an MBA degree from the London Business School and spent the last 10 years in various leading positions within the global digital ecosystem. He first worked at McKinsey & Company, where he ran several large digital transformation projects in various industries and then at Red Ventures, the largest American digital media company, where he was responsible for establishing and growing the business in Europe. Having spent 18 years abroad, he joined Fortenova Group on 1st September 2022 in the position of Group Director of Digital Transformation and will, along with his new position at MultiPlusCard, also keep managing the digital transformation at Group level.
The interim relief judge of the Amsterdam Court yesterday rejected all remaining claims by SBK Art and Saif Alketbi, essentially aimed at attempting to halt the sale process of Fortenova Group MidCo B.V. and dictate the course of that process, despite SBK Art being a sanctioned party without voting rights. This vexatious litigation by SBK Art and Saif Alketbi has now been rejected for the third time by the Dutch judiciary.
The judgment was made following the oral hearing of the parties held on June 14, 2023, where the court initially rejected the request to prohibit the convening of the depositary receipts holders’ meeting. Yesterday, both that decision and the present judgment rejecting all other requests by SBK Art and Saif Alketbi were thoroughly reasoned.
From the detailed reasoning of the judgment, especially noteworthy is the Court’s reaffirmation of the previous rulings that sanctioned individuals such as SBK Art are prohibited from exercising voting rights, either directly or indirectly.
Primarily, the Court concluded that Fortenova Group TopCo B.V. has a legitimate interest in selling Fortenova Group MidCo B.V. to ensure the sustainability of Fortenova Group’s financing, which has been compromised by the involvement of sanctioned parties in the equity structure.
The ongoing process of exploring interest in the purchase of Fortenova Group MidCo, according to the Amsterdam Court, has adequate safeguards to protect the interests of all stakeholders. The claims that Fortenova Group intends to eliminate SBK Art through the sale of MidCo to the second-largest unsanctioned shareholder at an unreasonably low price have been deemed “insufficiently plausible” by the judgment of the Amsterdam Court.
The Court also determined that SBK Art receives all the information to which it is entitled, while Mr. Saif Alketbi “is not a certificate holder and therefore, under the terms of the administrative conditions of Fortenova Group STAK, does not have the right to access information.”
The plaintiffs, SBK Art and Saif Alketbi, have been ordered to cover the legal costs and court fees of Fortenova Group.
At today’s DR Holder Meeting Fortenova Group Depositary Receipt Holders have approved, with almost 98% majority of those voting, the Group’s proposal to refinance the existing bond in the amount from EUR 1.1bn to EUR 1.2bn with the Group’s current majority creditor HPS Investment Partners.
After significant efforts to find financing with banks and bond markets, the Fortenova Group management has decided to enter a new bridge-type financing for the period until 29 November 2024 arranged by HPS, the existing leading non sanctioned creditor, which the DR Holders have supported with a large majority of votes in favor of this proposal.
The conditions of the new financing of the entire amount of the current bond ranging from EUR 1.1bn to EUR 1.2bn offered by HPS in regards of margin and EURIBOR floor remain the same as for the current bond. The additional terms of the new bond include an Original Issuer Discount, a one-off payment of 6.75 percent of the bond amount to be issued, which reflects sanctioned entities being in the Group’s capital structure thus limiting financing options.
This cost is the price of increased risk due to sanctioned equity holding and the inability of the market to participate in the refinancing of the Group that has Russian sanctioned co-owners. It should be noted that such a cost is also the price paid because of the sanctioned co-owners by all the company’s shareholders The short term 15-months maturity opens the last opportunity for the Group to find the solution for sanctioned entities to cease to be co-owners, which is a prerequisite for the Group to be able to refinance again in that short period of time at the capital markets.
An invitation was sent today by Fortenova Group to the Depositary Receipt Holders for a Meeting to be held on 27 June, where they will, among other things, vote on the Group’s proposal to refinance the existing bond in the amount from EUR 1.1bn to EUR 1.2bn with the Group’s current majority creditor HPS Investment Partners.
In the materials for the Meeting, the DR Holders were provided with a detailed presentation on how the Group’s management, prior to putting the proposal on accepting the terms and conditions of the refinancing offered by HPS to the vote at the DR Holders’ Meeting, explored all other viable refinancing options that were available to Fortenova Group, including extensive discussions with regional and investment banks as well as bond market considerations.
After significant efforts to find financing with banks and bond markets, the Fortenova Group management has decided to enter a new financing for the period until 29 November 2024 with HPS, the existing leading non sanctioned creditor, provided that the DR Holders vote in favour of this proposal.
The conditions of the new financing of the entire amount of the current bond ranging from EUR 1.1bn to EUR 1.2bn offered by HPS in regards of margin and EURIBOR floor remain the same as for the current bond. The terms of the new bond include an Original Issue Discount, a one-off payment of 6.75 percent of the bond amount to be issued, which partly reflects sanctioned entities being in the Group’s capital structure and underlines the necessity of dealing with this problem as soon as possible. When the issue of the sanctioned entities being in the Group’s capital structure is resolved, Fortenova Group’s access to the banking market will reopen and the company will explore it again.
One of the terms agreed with HPS as part of the new financing is the commencement of a process for the potential divestment of Fortenova Group’s Agriculture Division by no later than 31 December 2023. Should the divestment actually take place, proceeds will be used for the Group’s further deleveraging or for strategic investments in the Group’s other core retail and food businesses.
With regards to its operating business, the Fortenova Group continues to perform extremely well. Preliminary unaudited results for 2022 show net revenues exceeding EUR 5.2 billion, operating profits according to IFRS-16 of more than EUR 470 million (adjusted operating profits of more than EUR 300 million), with EUR 1.1 billion of net debt of. Group liquidity was in excess of EUR 280 million and the Group achieved its best-ever ratio of total net debt to adjusted operating profits of 3.5 times.
Following the oral hearing of the parties, the interim relief judge of the Court of Amsterdam has rejected the claims filed by SBK Art and Saif Alketbi to forbid Fortenova Group STAK to hold the DR Holders’ Meeting scheduled for tomorrow, where the Holders will decide on the appointment of Fabris Peruško to the management boards of the Dutch companies.
The urgent hearing was held upon request dated 8th June 2023 and took place the day before yesterday. Among other things, SBK Art requested to stop the meeting where the Depositary Receipt Holders will vote on appointing Fabris Peruško, Chief Executive Officer of Fortenova Group, as Director of Fortenova Group’s management companies in the Netherlands, on technical amendments to the documents of the umbrella organisation Fortenova STAK Stichting and amendments to Fortenova Group’s Articles of Association reflecting the conversion of the company’s share capital from kuna to euro.
Given the urgency of the proposal and the forthcoming Meeting tomorrow, the Court of Amsterdam rejected the claim without a detailed statement of grounds, which will follow subsequently. The other points of the claim shall as well be decided by the Court of Amsterdam subsequently.
The rejection of another SBK Art’s claim is one in a series of decisions adopted by Dutch courts rejecting the attempts of a sanctioned person to interfere with the Group’s corporate decisions.
The company Mercator-CG and the retail chain Franca signed a sale-purchase agreement today, whereby Mercator-CG acquired the Franca retail facilities in almost all municipalities in Montenegro.
This is Fortenova Group’s first acquisition in the region, whereby the company has accomplished one of its strategic goals – to secure the strengthening of its store network on the SEE markets and its availability to the customers not only through organic growth, but also through acquisitions of local retailers.
The transaction was previously approved by the Competition Protection Agency and with its realisation Mercator-CG, which operates under the brand IDEA, has improved its offer to consumers and availability, ensuring a footprint covering the entire country.
Namely, the retail chain owned by the Franca family has 67 stores, with most of them – 13 to be precise – located in Podgorica, eight in Budva and seven in Bijelo Polje. With the acquisition of the new stores the retail network of the IDEA brand grows to almost 200 stores and with the takeover of 900 Franca retail employees the significance of the company Mercator-CG as one of the country’s largest employers shall grow as well, because following this acquisition the IDEA brand will employ more than 2 500 people. As employer, Mercator-CG has also assumed all contractual obligations towards its new employees.
On behalf of Mercator-CG the Sale-Purchase Agreement was signed by Ivan Karadžić, Executive Director of Mercator-CG, Ivan Antonijević and Boško Vuković, both Deputy Executive Directors of Mercator-CG and on behalf of Franca by the co-owners of shares and members of the Franca family: Hilmija Franca, Hatema Franca, Halida Franca, Sead Franca, Safet Franca and Halid Franca.
The agreement signing ceremony that finalised the transaction was also attended by Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors, who stated on that occasion:
„Fortenova Group has strongly supported this acquisition pursued by the company Mercator-CG because it bears witness to the fact that we are implementing our strategy of strengthening the regional presence in retail. We have a clear vision of what we want to achieve in this business in all the five countries of our operations, we want to provide high-quality offerings and service, affordable prices as well as a strong footprint and a wide choice for our consumers. We can already clearly see the effects of synergies in retail that have started with the integration of Mercator in 2021 – from improved implementation and management to excellent collaboration with local suppliers, which has due to the shorter supply chains proved to be our key competitive advantage in the two recent crises. Given that the Franca family is a producer of high-quality fresh and processed meat, I am certain that the good partnership collaboration will continue in this case, too” – Peruško said.
Viewed from the angle of Hilmija Franca, Franca company’s Executive Director, with this acquisition Franca will consolidate its leadership position on the Montenegrin fresh and processed meat market. Franca will continue to be present on the market under that name, as one of the largest and most recognisable local brands. “The most important thing for us is that all 900 employees will stay employed with the new company” – says he and continues:
“To become part of a regional network and join forces with one of Montenegro’s largest chains means a great deal to us. We are exceptionally proud that our products will be present in all IDEA stores and thus even closer to numerous consumers. At the same time, I am sure that this partnership will also open the gates to other markets for us as leaders in our country’s meat industry. The focus of the company Franca will be on development projects in the primary processing industry and on strengthening exports to countries of the EU and the region. Like before, agricultural producers will remain Franca’s priority through repurchases. I believe that this important business step will be the beginning of new, great successes for all of us” – Franca said.
Ivan Karadžić, Executive Director of the company Mercator-CG noted on the occasion of closing the transaction that there was no doubt that this acquisition would be yet another stride in meeting business goals.
„This is an important point in our operations. The merger of the Franca store chain is an important step in our strategic development as it positions us as leader on the Montenegrin market and with around 200 stores the only chain present in all municipalities of Montenegro. With this acquisition our company shall also become the country’s largest employer with over 2 500 employees and I would like to use this opportunity to wish the more than 900 employees of Franca Markets a sincere welcome to our team. I am happy that they will become part of our company and that we will continue to meet the goals set as one team. With this acquisition and the focus on fresh, local, private label, the Super Card and digital transformation we are changing the retail market in Montenegro, improving our customer service and implementing state-of-the-art trends by using the power of the Group we belong to” – said Karadžić.
Zoran Mitreski, Executive Director of Fortenova Group for Retail and President of the Management Board of Konzum also highlighted the importance of the realised acquisition, particularly in the light of expanding the store network.
„We have strong investment dynamics within the system. Last year we opened more than 150 points of sale across the region, whereof 60 new and 90 refurbished ones. The formal takeover and integration of Franca will follow in autumn, as well as further investments and the continued exploration of further merger and acquisition opportunities in retail”, Mitreski announced.
On a different note, the Franca retail chain was established as part of the company founded by the Franca family in 1990, having started from the former meat industry “Meso-promet”. Over the last 30+ years they have developed one of the most significant production and retail companies on the territory of Montenegro, with a total of 1 500 employees. Franca has based its recognition on the market largely on local fresh and processed meat from their own farms, with their products present not only on the Montenegrin market, but also in the region and in some EU countries.
The realised acquisition will also mean the combining of expertise, technologies, brands and other resources of both companies and provide for a stronger market position, meeting different customer needs as well as assortment extension, primarily by offering premium local products.
As many as 13 Fortenova Group companies received the Certiﬁcate Employer Partner (CEP) for the year 2022, which is awarded for excellence in human resources management.
Out of the total number, five companies – Konzum, Pik Vrbovec, Jamnica, mStart and Fortenova grupa d.d. – successfully completed the recertification process, while eight companies participated in the certification process for the first time – Mercator-Serbia, Mg Mivela, Roto dinamic, Zvijezda, Dijamant, Belje, Pik Vinkovci and Vupik.
The Certificate Employer Partner is an unbiased acknowledgement by experts from the European HR community verifying the highest quality of management in seven key areas of human resources. Thereby the practices in Croatia are compared to global trends, thus improving the standards in human resources management and promoting examples of excellence in HR. The certification process assesses and awards points to topics such as selection, competence development, leadership, work performance, involvement and satisfaction, career and succession, rewarding etc. at all organisational levels.
“When so many different companies from one Group receive an external professional acknowledgement that the standards they apply in their operations are at the highest level, regardless of their respective area of operations, this is a legitimate reason to be proud and a proof that our internal bonds are getting ever stronger. However, due to the situation on the labour market that employers on all markets have been faced with since several years, this certification has a particular weight as it brings a great positive reverberation and recognition. Having satisfied and motivated employees and encouraging work environments, as well as creating and maintaining those partnership relations is what constitutes one of the key competitive advantages for employers today. This also means having a positive impact on a number of processes in our regional environment, which is the fundamental prerequisite for long-term sustainability” – said Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors on the occasion of the Certificate Employer Partner presentation ceremony.
“This is a truly valuable acknowledgement for all our initiatives taken so far in the area of human resources development at Fortenova Group companies and to all teams working on it with great commitment. Besides showing that the companies’ operations are on the right track and that the employees’ impact on the organisations’ growth is continuously being strengthened, those acknowledgements are also a significant motivation for us to continue being a good practice example for other companies in the region by placing employees in the focus of our operations” – said Gordana Fabris, Director of Human Resources at Fortenova Group.
“It has been a pleasure to follow Fortenova Group over the last three years since the first company from the Group got involved in the quality assessment of human resources management according to the regionally recognised Employer Partner methodology. We are particularly pleased to see that the number of companies from Fortenova Group that hold the Certificate Employer Partner has significantly grown. The thirteen Certificate holders have a headcount of more than 26 500 employees and thereby not only have an impact on the Croatian and the region’s economies, but also affect the quality of many work environments. We know from our consulting experience how challenging it is for companies of that size and diversification to introduce new HR processes and implement changes. Fortenova Group companies particularly stand out in terms of the quality of their recruitment processes, onboarding for new employees and employee development through internal academies with impressive tradition. We look forward to future successes of Fortenova Group companies which will certainly not fail to happen given the great investments in people, which are their main value” – said Lara Šubić Šuše, Employer Partner Project Manager.
The Fortenova Group is launching an international process for examining interest by potential investors for purchase of Fortenova Group MidCo B.V., a Dutch holding company that fully owns Fortenova grupa d.d. International investment bank Lazard has been hired to support this process. The collection of expressions of interest has just begun and the end of the process is not expected before the end of September 2023.
In the material distributed to the potential investors the Fortenova Group lists its unaudited, forecasted financial indicators for the year 2022 that show the stability of the operational business of the company, as follows:
Net revenues: Over EUR 5.2 billion
EBITDA IFRS-16: Over EUR 470 million
Adjusted EBITDA: Over EUR 300 million
Net debt: EUR 1.1 billion
Net debt / adjusted EBITDA ratio: 3.5x
Liquidity: Over EUR 280 million
The same material reminds potential investors that the market position of the Fortenova Group in the five countries of the region where the Group operates remains without comparison. The Fortenova Group is the largest retail chain and food producer in the sectors of beverages, oil production, meat production and processing and agricultural production, and tens of millions of customers know the company through a portfolio of more than 100 strong brands. The Fortenova Group is also by far the largest regional private employer, with over 45 thousand employees and around 30 thousand partners and suppliers, the vast majority of whom are local producers of the region’s market.
Sanctioned equity holders (Sberbank and VTBE) hold 49.9 percent of the equity in the Fortenova Group, and although the Fortenova Group itself is not subject to sanctions, the sanctioned co-ownership significantly complicates business operations and negatively affects the value of the company for all stakeholders. Primarily, it makes it impossible to reach a sustainable and efficient capital structure. Furthermore, following Sberbank’s failed attempts to dispose of its own equity in the Group, certain applicable licensing grounds to obtain a sanctions licence to implement the exit of the sanctioned DR holders have expired. Therefore, there are currently no viable options available to dispose of the equity held by SBK Art or Sberbank.
The refinancing of EUR 1.05 billion notes issued by Fortenova Grupa d.d. will be solved in the short term, most likely through the extension of the current notes for a period not longer than the end of 2024, with conditions similar to the current ones, but also with a significant additional one-time cost. Fortenova Grupa d.d. has received a non-binding offer for such an arrangement, which will likely be accepted in order to bridge the time period that is needed to resolve the issue with sanctioned and other non-eligible equity holders, such resolution to be in accordance with applicable sanction rules. If Fortenova Group’s equity structure remains unchanged at that time, it is likely that any subsequent refinancing under such terms will only diminish the company’s value for all stakeholders, including the equity holders and especially the non-sanctioned equity holders.
In the case of the potential sale of Fortenova Group MidCo B.V., the intention is to pay the Contingent Payment Rights – CPRs of Fortenova Group TopCo B.V. before any other payment from the collected funds, which in the amount of about EUR 78 million refer to the so-called “granični dug / border debt”, i.e. suppliers’ claims which were agreed in the settlement of Agrokor’s creditors in 2018/19 and were reinstated at Fortenova Group TopCo B.V. level.
Through this process the Fortenova Group intends to maximise value for all stakeholders including all equity holders, whether sanctioned or not. The equity holders of the Fortenova Group have been informed of the process and have been called to propose potential alternative solutions, should they have such suggestions.
At the end of the proposed process the Fortenova Group would no longer have sanctioned participants in its capital structure, that were mostly inherited from the settlement process of Agrokor’s creditors. This would solve the key obstacle in securing a favourable, long-term, sustainable new capital structure of the Fortenova Group and it would allow renewed international investment potential for the whole group.
By decision of Fortenova Group’s Board of Directors Tomislav Kramarić, Member of the Management Board of Mercator, has assumed the position of President of the Board of Mercator d.o.o. Ljubljana effective today, replacing in that position Tomislav Čizmić, who leaves the company by mutual agreement.
Having managed Mercator’s retail operations since December last year as Member of the Management Board, Tomislav Kramarić has now assumed responsibility for the entire company and its full transformation towards a cost-effective and profitable part of Fortenova Group’s regional retail business. This is particularly important with regard to the market circumstances and dynamic changes and challenges faced by retail companies on all markets due to inflation and other instabilities. Given the results that he achieved in running Konzum’s retail operations, particularly during the operational consolidation period over the course of the Extraordinary Administration as well as through the challenges of the pandemic and global crisis, the Board of Directors considers Kramarić to be the best choice when it comes to managing the entire transformation process at Mercator.
“It has been a full two years since the transfer of Mercator to Fortenova Group’s ownership. In the meantime we have realized a number of activities focused on consolidation and taking over the 100 percent ownership, as well as the additional stabilization of the company’s operations. Tomislav Čizmić headed Mercator in the most sensitive period for the company and made a great contribution to stabilizing its operations as well as running and closing the process of Mercator’s transitioning to Fortenova Group and we sincerely thank him for that. We are currently in the process of integrating all parts of our retail business into a compact network and given the dynamics in the environment, we continuously keep looking for models to improve our regional operations in order for them to be to the benefit of all stakeholders, on all markets. Part of this are also changes related to key responsibilities within the system. Hence this change is also part of those activities that will, we are sure, lead to strengthening our market positions and to competitiveness in the long term for Mercator, and consequently for the entire retail business, too” – said Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors, on the occasion of introducing the change at the helm of Mercator.
Until joining the Management Board of Mercator in December 2022, Tomislav Kramarić built his career at Konzum over the course of fourteen years, having held a number of managerial positions. Among other things, he spent five years as Director of Retail, to assume responsibility for the retail business as Member of the Management Board of Konzum in 2020. He graduated from the Zagreb Faculty of Economics and completed MBA studies at the IEDC Bled School of Management.
Agrolaguna’s new Istrian cheese, olive oil and wine tasting room and store was opened today in Poreč at the address Mate Vlašića 34. With the new creative concept called Taste&Shop Festigia Agrolaguna intends to enhance the offer of Istria’s oenology and gastronomy tourism. Attending the opening were Fabris Peruško, Fortenova Group’s Chief Executive Officer and Member of the Board of Directors, Sotiris Yannopoulos, CEO of the Food Division at Fortenova Group, Nerina Zec, Chairwoman of the Management Board of Agrolaguna, Loris Peršurić, Mayor of the City of Poreč and Boris Miletić, Prefect of the County of Istria.
The newly opened store will offer its customers and visitors a wide range of premium Festigia and Vina Laguna wines, Ol Istria olive oils and Špin Istrian cheeses. The tasting room will be the venue for themed nights and educations about wine, oil and cheese and during the tasting events guests and customers will be introduced to the entire process and experience of creating Agrolaguna’s premium products. The intention is for this store and tasting room to also become the favourite gathering spot for all gourmets who appreciate indigenous Istrian products.
“The comprehensive renovation of this facility is an important part of Agrolaguna’s transformation into a modern wine, edible oil and cheese producer, a change supported by Fortenova Group both organisationally and investment-wise. The quality of our products has been acknowledged by numerous international awards, and having in mind the region’s tourism potential, with this new concept we have also made a step forward in terms of presentation because tourism is an equally important lever for the development of Agrolaguna as it is for the development of Istria. Our wish is for the tasting room, as well as for some other parts of the company like the vineyards or cellars, to become an indispensable point of the region’s tourist offer. The company has thus affirmed its responsibility towards its surrounding, contributing to the improvement of modern destination tourism, while also developing a partnership with the local community” – said Fabris Peruško, Member of the Board of Directors and Chief Executive Officer of Fortenova Group on the occasion of the new store and tasting room opening.
Nerina Zec, Chairwoman of the Board of Agrolaguna, pointed out: “This concept constitutes a great opportunity to show both our long-standing and our new customers how much knowledge, experience and expertise we have invested in the production of high-quality local Istrian products. Our new Festigia tasting room and store offers a unique shopping and tasting experience, making it possible for all customers and visitors to get even closer to the Istrian culture.”
“There are many associations tied to Istria, one of them certainly being the comprehensive oenology and gastronomy offering, which is also the second most important motive for guests to visit our part of the world. As region we are too small to compete with mass production and therefore we have opted for excellence in everything we do. The County of Istria is proud of all achievements of our farmers and entrepreneurs, who have with their work and enthusiasm contributed to the promotion of the Istrian brand, Agrolaguna being one of them. Congratulations on the opening of the new tasting room” – said Boris Miletić, Prefect of the County of Istria, while Loris Peršurić, Mayor of the City of Poreč, pointed out that any city would be proud to call such a large producer of outstanding quality its own. “I believe that this boutique store will soon become a favourite spot for everyone who wants to take the taste of Poreč and Istria home with them. I would like to congratulate the entire collective that creates this products and wish them a lot of success going forward” – he said.