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.
Fortenova Group TopCo B.V., the Dutch holding company which is the ultimate owner of Fortenova grupa d.d. and its well-known companies in Croatia and the region, such as Konzum, Mercator, Zvijezda, Dijamant, Jamnica and PIK Vrbovec, today announced a transaction for a revised equity structure designed in a way to strengthen and ensure Fortenova Group’s future successful operations. This new ownership structure is intended to prevent further financial damage and operational difficulties, which have so far resulted from the presence of sanctioned equityholders in the company.
Essentially, the Dutch holding company announced that an agreement has been reached with the company Open Pass Ltd., the largest non-sanctioned Fortenova Group equityholder (depositary receipt holder in Fortenova STAK), which should result in a new ownership structure with no sanctioned equityholders within it. The agreement encompasses the sale and transfer of 100 percent of the equity held by Fortenova Group TopCo B.V. in the company Fortenova Group MidCo B.V. to a newly incorporated Dutch corporate structure, consisting of the Dutch foundation Iter STAK Stichting and the Dutch company Iter BidCo B.V., for a consideration of up to EUR 660 million in total.
Out of the total consideration payable by the buyers for MidCo, EUR 500 m is unconditional and will become payable at completion of the proposed transaction, while the payment of the remaining up to EUR 160 million is dependent upon Fortenova Group reaching the financial goals set forth in the agreement, that should be made possible by this very transaction. The financial goals to the realisation of which – whether partial or full – the payment of the remaining amount is connected, are primarily the arrangement of a sustainable refinancing in 2024, under conditions better than the current, and reaching certain net debt-to-EBITDA ratio targets lower than the current. If a disposal or listing of the company’s material amount of assets should occur within the next three years, the agreement sets forth possible additional payments to the current equityholders that will not be part of the new ownership structure. By way of reminder, in September this year Fortenova Group signed a bond issuance agreement in the amount of EUR 1.2 billion, whereby the company’s debt has been refinanced for the short-term period until late November 2024 and the current creditors – funds headed by the US-based HPS Investment Partners, will continue to have a pledge on the shares of the company MidCo.
An approval for the transaction which is necessary for its closing shall be requested from the equityholders (depositary receipt holders) of Fortenova Group STAK at the Depositary Receipt Holders’ Meeting, and the voting is expected to be completed on 19th December 2023. The agreement on which the equityholders (depositary receipt holders) shall vote sets forth that the right to participate in the new ownership structure under the same conditions as OpenPass will be provided to all eligible equityholders, i.e., practically all non-sanctioned current depositary receipt holders of the company, among which there are a number of Fortenova Group’s partners and suppliers. Current equityholders that are not sanctioned due to the Russian aggression on Ukraine shall thus be able to either simply transfer their stake to the new BidCo or, by opting to provide an additional investment at own discretion, increase their ownership stake or elect to cash out and exit the ownership structure. The respective funds to be paid to the sanctioned equityholders will be paid to a special account that they will be given access to once the sanctions regulations of the European Union, the US and the UK permit it.
What the new ownership structure will look like exactly will depend on the interest of the current non-sanctioned depositary receipt holders in additional equity investments. In order to ensure that the funds required for the transaction to be closed at the agreed price are available regardless of the level of the equityholders’ interest in additional investment, Open Pass has committed to fund all the consideration payable, if necessary.
The Board of Directors of Fortenova Group TopCo unanimously decided to approve this transaction and to put it to the vote of the depositary receipt holders as a result of a long process during which TopCo had sought offers for the acquisition of Fortenova Group or a similar transaction from different sides, followed by extensive negotiations with Open Pass, which proved to be the only party willing to underwrite an acquisition of all shares in MidCo through the BidCo structure, should that be necessary. In arriving at the proposed transaction, the Board of Directors of TopCo, including two newly appointed independent directors along with the existing members of the management board, has taken into account the interests of all stakeholders, paying particular attention to matters such as securing the required funds and the governance of the new BidCo structure. The TopCo management was advised by leading global legal and financial experts, including the law firms Akin Gump LLP and Houthoff Coöperatief U.A. and the investment bank Lazard Frères SAS, and the independent international investment bank Houlihan Lokey has provided a fairness opinion in connection with the proposed transaction.
The proposed transaction also has the unanimous recommendation of Fortenova grupa d.d.’s Executive Directors. They decided to endorse the transaction, since it is in the best interest of the Fortenova Group, its business and all its stakeholders.
On this occasion Fabris Peruško, Fortenova Group’s CEO and Member of the Board of Directors said: “This agreement will enable all current non-sanctioned equityholders of our company to decide, under the same conditions, whether they want to continue to be equityholders in Fortenova Group’s new ownership structure, without the sanctioned equityholders that will be compensated in accordance with the sanctions regulations. Reaching the agreement with Open Pass, which has agreed to underwrite the entire amount of the transaction if necessary, is a key turning point that opens a new chapter for us and provides Fortenova Group with new prospects. With the beginning of the war in Ukraine we have found ourselves, through no fault of our own, in a situation where the sanctioned Russian equityholding significantly restricted our operations and further development, rendering a long-term and sustainable refinancing practically impossible. This situation is now finally about to change for the benefit of all our employees, partners, customers and the broader communities in the countries where we operate. I am particularly pleased that the implementation of this agreement will finally enable the payment to the suppliers of the former Agrokor, most of whom are current partners of Fortenova Group, of a debt totaling EUR 82 m held by the Dutch holding company Fortenova Group TopCo.”
In order for Fortenova Group’s equityholders to be able to make an informed decision on how to vote and a decision on whether and with which amount of a possible additional investment to transfer their share into BidCo STAK, Fortenova Group TopCo has prepared detailed materials available to the investors, with whom a conference call will be held as well. The closing of the transaction, expected to take place between Q1/24 and Q2/24, will also require approvals of certain sanctions authorities as well as approvals of market competition authorities in several jurisdictions.
Mercator signed a contract on the acquisition of 100 percent of shares in Entrotuš today, and together with the signing of the contract, the procedure has been initiated to obtain the approval of the Market Competition Agency of the Republic of Slovenia (AVK). The merger between Mercator, owned by Fortenova Group, and Engrotuš will strengthen the market position of both retailers and provide new development opportunities for Slovenian suppliers and employees. The signatories to the contract are convinced that the integration of the the two companies forms an excellent foundation for the future growth of the integrated company and its operational sustainability in the long term, which will bring benefits for all stakeholders and, consequently, also for the entire economy.
“It is our great pleasure to close the year with yet another great acquisition in retail. Following Franca markets in Montenegro, the acquisition of Tuš stores is the second major expansion of our retail network within short time, whereby we have definitively affirmed the status of the region’s strongest domestic retail chain, proving what we had announced when we integrated Mercator into Fortenova Group’s network in 2021. Our satisfaction is even greater taking into account the challenges that retail operations have faced over the course of this and the last year. In spite of that, we have remained very focused on the realisation of our strategy, with the main goal being to get as close to our customers as possible across the entire network and to continuously offer them a wide choice of products and services at affordable prices, while strengthening the national economies in the five countries where we operate by fostering excellent relationships with local suppliers at the same time. It is our strong belief that this is the best guarantee for the long-term development of the entire national economy – from production through processing to retail – which then constitutes a significant contribution to the sustainable development of the region’s economies through employment and investment support” – said Fabris Peruško, Fortenova Group’s CEO and Member of the Board of Directors.
On behalf of the sellers, the companies Tuš holding and AH Invest 1, Andraž Tuš pointed out: “Today we have signed a sale-purchase agreement for 100 percent of shares in the company Engrotuš d.o.o., without the operations of Tuš drugstore, which is in the process of being spun off. After several months of negotiations we have decided to proceed with a buyer that, in our opinion, is the best choice for our employees, business partners and the development of the company’s core business. We believe that this integration will have positive effects on the Slovenian economy.”
Tomislav Kramarić, President of the Management Board of Mercator, said: „This transaction marks the continued ownership consolidation in the retail sector. Mercator has recorded stable organic growth, and the acquisition of and merger with Engrotuš will help us realize our business goals. I am convinced that the integration is in everyone’s best interests, from employees to Slovenian suppliers across the chain. The integration will also strengthen the stability of both companies and offer Slovenian consumers the best choice of products and services.”
Pending the obtainment of approval from the Market Competition Agency, no details of the contract or further development plans of the merged companies can be disclosed.
Fortenova Group publishes its financial results for H1/2023 and its 2022 financial statements.
In respect of the unaudited consolidated statements, for H1/2023 the company generated EUR 2.7 bn of total revenue, outperforming the same period last year by 9 percent. Adjusted operating profits amounted to EUR 101 million. Net debt has remained below EUR 1.1 billion, with the liquidity on the company’s accounts at EUR 279 million. All of the Group’s business divisions have recorded total revenue growth against the same period last year, though with reduced operating profits. The drop in operating profits is primarily due to the large increase in electricity and raw material costs, increase in salaries, as well as the selling price limits for specific product categories imposed by the Governments in the area.
In respect of financial results for 2022, the audited consolidated results the Group presented total consolidated revenues of more than HRK 40.7 billion or EUR 5.4 billion, exceeding the 2021 revenue by 30 percent. Consolidated adjusted operating profits grew by over 20 percent, amounting to more than HRK 2.3 billion or EUR 310 million, along with a positive net result. At the end of 2022 the net debt was slightly below EUR 1.1 billion, with a leverage ratio of 3.44 times (as per Lender defined terms), which represents half of the leverage ratio that the Group had in 2019, the year of Fortenova Group’s foundation. Cash on the company’s account at year end was EUR 290 million.
“The Group’s operating results continue to show that Fortenova Group has managed to separate its operational performance from its ownership issues, where the presence of sanctioned co-owners in the structure makes it more difficult to achieve a sustainable and efficient capital structure. With the recently executed refinancing with our existing lender HPS, we will no longer have sanctioned entities on the credit side of the Group which delivers on our plans “– said Fabris Peruško, Fortenova Group’s CEO and Member of the Board of Directors.
“The Group delivered outstanding results in 2022 with the growth with the highest ever cash EBITDA and the first full year positive net result coming only from ongoing operations. H1 2023, has as expected been more challenging given the impact of inflation on costs and consumer income and purchasing power. The Group has so far shown considerable resilience given these headwinds with the Retail Group in particularly continuing to perform very well.” – said James Pearson, Fortenova Group’s Chief Financial Officer.
Along with the financial performance indicators, Fortenova Group has also disclosed a thorough and comprehensive overview of the Group’s operating performance in 2022 in its second consecutive Sustainability Report, where it has presented a number of activities and initiatives related to the process of establishing the strategic framework for sustainability management. Those activities have had positive effects on all the markets on which the Group operates – among its customers, clients, business partners, in the local community as well as among its employees and other stakeholders.
The Group is particularly focused on working on its sustainability and on publishing the Sustainability Report, in spite of the numerous challenges that it faced last year. “At no point has this called into question our commitment to one of the company’s strategic priorities – the realization of our sustainability goals and the positioning of Fortenova Group as a responsible corporation. The Report has presented our most important actions when it comes to environmental, social and governance topics in the Group to the broader public and, moreover, offered an in-depth insight into our operations and our environmental impact. We see this thorough annual analysis of all our constituents as an excellent lever in improving transparency and raising awareness of our priorities” – Fabris Peruško concluded.
As presented in the Report, as part of each of the seven key topics that constitute the strategic sustainability framework, in mid-2022 the Group established internal working groups with a view to defining measurable initiatives for the period until 2030. Thus, for example, standing out within the “GHG Reduction” topic there is the project of Scope 1, 2 and 3 calculations for all Fortenova Group companies, intended to set up an action plan for achieving climate neutrality, while as part of the “waste management” topic, all Beverages Group companies are currently implementing the project of introducing the tethered cap. Konzum, for example, initiated the project called Recyclopedia, intended to educate consumers and prevent the creation of food waste in households and was declared the Best Donor for the fifth consecutive time. Along with encouraging short supply chains, a Supplier Code is in preparation as well. Last year the Group also conducted surveys regarding gender equality on all markets and adopted a Diversity, Equity and Inclusion Policy. An important aspect of the Group’s strategic framework is also the topic of initiating a project to identify climate risks and opportunities and build sustainability criteria into investment decisions.
„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.