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Istrabenz Sells Food Company to Croatia's Atlantic Grupa (adds)

Koper, 01 July (STA) - The insolvent Istrabenz holding has sold its food subsidiary Droga Kolinska to Croatian company Atlantic Grupa in a deal reportedly valued at around EUR 240m as part of efforts to cut its debts.

The contract on the sale of 95% in the Slovenian food company, whose product line ranges from soft drinks to snacks and spreads, was signed by representatives of Istrabenz and Atlantic Grupa on Wednesday, Istrabenz announced in a press release issued through the Ljubljana Stock Exchange on Thursday.

The deal culminated a three-month process that saw the Koper-based Istrabenz commission French bank BNP Paribas to seek out interested domestic and international investors for the majority stake.

Istrabenz received eight non-binding offers and late three-binding offers for the stake, eventually selecting Atlantic Grupa as the best bidder.

The Croatian company offered EUR 382m less Droga Kolinska's debts as of the date of the conclusion of the transaction, which is expected to be competed by the end of the year.

According to the latest estimates, Droga Kolinska's debt stands at around EUR 146m, which means that the Croatian company will pay around EUR 240m in cash for the food company.

The sale of the Ljubljana-based Droga Kolinska is part of the debt restructuring programme adopted by Istrabenz, which is fighting to clear some EUR 500m in debts after announcing insolvency at the end of April 2009.

Istrabenz chairman Tomaz Berlocnik told a press conference in Portoroz on Thursday featuring representatives of the buyers and Droga Kolinska that the holding will clear as much as half of its debts with the sale. He believes this will increase the holding's chances of striking a deal on out-of-court debt restructuring with the banks.

Moreover, Istrabenz says the new owner will provide Droga Kolinska with the foundations for growth and expansion to new markets, which was confirmed by chairman of Atlantic Grupa Emil Tedeschi.

"Atlantic Grupa entered the process as a strategic partner with the aim of providing for development of Droga Kolinska as a whole," Tedeschi said.

He tried to allay fears that the Slovenian company's core activities may be harmed by the arrival of the new owner in Portoroz today. He said Atlantic Grupa will not sell any of the five key activities of Droga Kolinska. The aim is to develop these production lines (coffee, water and soft drinks, sweets, snacks and baby food).

Moreover, Tedeschi promised that production will be retained in Slovenia, while new production capacities will be built in Serbia, Bosnia-Herzegovina and Macedonia. "We are here because we recognised an excellent company and capable people," said Tedeschi.

Chairman of Droga Kolinska Slobodan Vucicevic said the deal was good for both parties. He assessed that Droga Kolinska has obtained a strategic partner with whom its "brand names will be in safe hands".

Droga Kolinska board member Enzo Smrekar assessed that Droga Kolinska and Atlantic Grupa have a complementary line-up of products and complementary markets. "There will be synergies in purchasing, production, distribution, sales and marketing," Smrekar said.

The combined company will have sales of EUR 650m and a workforce of 4,300 staff, making it one of the biggest food companies in SE Europe.

Atlantic Grupa, whose main business is sports food production, already owns respected brands such as multi-vitamin supplement Cedevita and Dietpharm.

With the acquisition of Droga Kolinska it will add brands such as coffee Barcaffe/Grand Kafa, soft drink Cockta and the snack Smoki.

To complete the deal Atlantic Grupa has established a subsidiary in Slovenia, Atlantic Nalozbe, which will conduct the transaction with EUR 170m of its own capital and a loan of EUR 78m obtained from Unicredit, Zagrebacka banka, Raiffeisen banka and Raiffeisen Zentralbank.

Istrabenz had considered selling Droga Kolinska - which it acquired in 2005 by buying Ljubljana-based food company Kolinska, which in turn bought rival food company Droga soon after - already in 2008, but changed its mind.

Droga Kolinska generated EUR 326m in revenues in 2009. It reported an operating profit of EUR 23.3m, but net profit was next to negligible.

Meanwhile, Berlocnik announced today that Istrabenz would push ahead with the sale of several of its tourism companies, including Grand Hotel Adriatic in Croatia's Opatija, Hotel Kempinski Portoroz, and Turizem Kras, the company managing the Postojna Caves, as part of ongoing debt restructuring at Istrabenz.

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