Ljubljana, 15 June (STA) - Croatian food and retail group Agrokor signed a contract on Friday to buy a 53% stake in Slovenia's largest retailer Mercator with a group of 12 shareholders including beverage company Pivovarna Laško and the state-owned NLB bank. Agrokor agreed to pay EUR 120 per share or a total of EUR 240m for the stake.
Agrokor, which failed in its bid to buy the stake at EUR 221 per share a year and a half ago, said that the combined company would generate a total of EUR 7bn in annual revenue and employ a workforce of 60,000.
"This tie-up shall benefit the consumers, employees, producers and creditors as well as other interested stakeholders, and it will make Agrokor the biggest retailing company in central and eastern Europe," Agrokor said in a written statement.
The company expects the merger to enable Agrokor and Mercator to improve their profitability and to secure additional financial stability, and allow them to continue to expand within the region as well as give them an opportunity to get into new markets.
Agrokor chairman Ivica Todorić was cited as pledging that Agrokor, together with Mercator, would increase operational effectiveness, preserve the jobs and improve competitiveness in the region and the whole European market.
"The combined expertise of Konzum (Agrokor's retail arm) and Mercator, their experiences and commitment will offer our customers a broader range of products, the best prices and the best quality of services," Todorić commented on the signing of the agreement according to the press release issued by Agrokor.
Assuming regulatory approval and successful restructuring of Mercator's debt and fulfilment of other terms of the contract, the transaction is expected to be closed within 2013, after which Agrokor will publish a binding bid to take over the remaining Mercator shares.
Offering EUR 120 per share, Agrokor values the whole Mercator at EUR 452m. The share closed at EUR 105.05 on the Ljubljana Stock Exchange on Friday, surging 11.76% on the day before on the back of unofficial reports that the sale was all but a done deal.
Beverage company Pivovarna Laško, which offloaded a combined 23.3% stake in the retailer held together with its affiliates, said that the sale process had been conducted by the London group of the international investment bank ING, and that the consortium of sellers selected Agrokor as the best bidder.
The consortium believes that "the terms of the transaction are the best possible outcome attainable considering the circumstances".
The management of Laško believes the value of the deal to "correspond to comparable transactions in the sector and in the region in the past" and reflects Mercator's financial and business success.
Laško is confident that the deal will be in mutual interest of both retailers, resulting in larger volume of sales and synergies in all their markets.
While not specifying, Laško said that Agrokor made certain commitments in the deal to the "future success and continued support to the staff and suppliers of Mercator".
The commitments mean that the current agreement with the trade unions will be honoured and that anticipated synergies of the merged group are not based on redundancies at Mercator beyond the measures announced by the Mercator management in the past.
Laško also expects Mercator's greater stability after the closure of the transaction to have long-term effects on the employees in terms of greater safety of jobs.