Mercator-Agrokor Sale Delayed as NLB Bank Postpones Decision

Mercator Poslovni Sistem (MELR) d.d.’s sale to Croatian rival Agrokor d.d. was delayed after the second- largest investor in the Slovenian store chain postponed approval and opposition to the sale intensified.

Supervisors of Nova Ljubljanska Banka d.d., the nation’s largest bank, which owns almost 11 percent of Mercator, postponed approval after NLB Chief Executive Officer Bozo Jasovic unexpectedly resigned, the Ljubljana-based lender said in an e-mailed statement yesterday. Mercator shares plunged.

Political leaders in the former Yugoslav republic, including the likely next prime minister Zoran Jankovic, a former Mercator chief executive, oppose the sale on the claim it would hurt national interests and reduce competition. Shares of Mercator have lost as much as 15 percent in the past month as the dispute over the retailer’s future heats up.

“Once Agrokor was chosen as the buyer of a majority stake of Mercator, there were more and more attempts and pressure on NLB to withdraw from the sale,” Jasovic told reporters in Ljubljana.

Nova Ljubljanska, in which the government and Belgium’s KBC Groep NV (KBC) are the largest owners, wants to raise 400 million euros ($525 million) to improve its capital ratio by mid-2012. It will probably report a loss in 2011 for a third consecutive year after bad loans depleted its reserves.

Shares Plunge

Mercator, which rose for three consecutive sessions before today, dropped the most in a month. The stock fell 15 euros, or 9 percent, to close at 152 euros in Ljubljana, giving the company a market value of 572 million euros.

“It’s a very bad signal on how Slovenia operates and how very close it is to the spirit of socialism,” Andraz Grahek, head of asset management at KD Funds LLC in Ljubljana said in an e-mail. “NLB is in a very poor state and was doing what all European banks do, divesting non-core assets to lower the need for fresh capital.”

The current battle is the eighth attempt to sell Mercator. Earlier this year, Pivovarna Lasko (PILR), the biggest owner of Mercator, announced it would add its 23 percent stake to shares of other owners, making the current 52 percent for sale. Agrokor later announced its bid and opened exclusive talks with the sellers. Croatia’s largest privately owned company offered 43 percent premium to the current stock price, or 221 euros per share, valuing Mercator at 832 million euros.

Other Owners

Another Slovenian seller, Nova Kreditna Banka Maribor (KBMR) d.d., yesterday agreed to sell its 5.2 percent stake, while Pivovarna’s approval is on hold pending a takeover offer of the beermaker.

Slovenia’s market securities agency began an investigation into the takeover bid for Pivovarna Lasko, agency director Damjan Zugelj said by phone today. The agency found that the takeover bid by Eastons Capital, based in Las Vegas, “isn’t valid” because of it was incomplete, Pivovarna Lasko said in a statement today.

The management of Mercator refused to allow due diligence to the buyers, while the Finance Ministry opposes the European Bank for Reconstruction and Development’s participation in a “possible hostile takeover” of Mercator by Agrokor since the transaction would have “negative implications” for the country’s economy, it said on Dec. 16.

“I am opposed to the sale and Nova Ljubljanska isn’t doing its job properly,” Ljubljana Mayor Jankovic, who won a snap election on Dec. 4 to take over the government and a former head of Mercator said yesterday.

Instead of its sale, Jankovic prefers Mercator take over Konzum d.d. (KNZMRA), the retail arm of Agrokor.

EBRD, IFC

Agrokor has said the European Bank for Reconstruction and Development and the International Finance Corp, the financing arm of the World Bank, as well as a unit of JP Morgan Chase (JPM) & Co., are its partners in the takeover bid.

The Slovenian Finance Ministry said on Dec. 16 that it opposes the EBRD’s participation in a “possible hostile takeover” by Agrokor since the transaction would have “negative implications” for Slovenia’s economy.

“It’s difficult to say when we will sign the sale contract,” Ivan Crnjac, an executive vice president at Zagreb- based Agrokor, said yesterday in an interview with public broadcaster TV Slovenija. “It’s a pure lie that the European Bank for Reconstruction and Development isn’t involved as they are supporting this transaction. We have the financial structure of the transaction in place and secured.”

To contact the reporter on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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