The managements of retailer Mercator and its Croatian buyer Agrokor will sign a cooperation agreement expectedly on Tuesday that will make part of the contract on the sale of a 53% stake in the Slovenian retailer and that would ensure Mercator's headquarters and key functions to stay in Slovenia.
"We think that we have safeguarded (Mercator's) interests in a way that best protects the shareholders, employees and to some extent suppliers as well," the retailer's chairman Toni Balažič told reporters in Ljubljana on Monday after a session of the supervisory board.
Balažič said the board had no objections to the sale contract and the inclusive cooperation agreement as it was briefed on the document today.
The cooperation agreement determines actions by the managements of both companies from the signing of the sale contract to the closing of the transaction and the acquirer's actions after the acquisition.
Balažič would not reveal the details, but he said that the agreement would enable Mercator to keep its headquarters in Slovenia and to get Mercator dominant position on the markets where its position was stronger and that the collective bargaining agreement would be respected.
The agreement would moreover ensure "transparent and professional management" of the company. It would also set forth that the management would remain two-tier for at least a few years more, including by keeping employee representatives on the supervisory board.
Mercator will publish a summary of the commitments in the agreement once the document is signed, which is expected to happen on Tuesday, according to the chairman.
Balažič said that the management had cooperated professionally and correctly in the sale proceedings, including by enabling the buyer to conduct due diligence, without disclosing the data whose disclosure could harm Mercator in terms of competition.
The management stated three conditions in the procedure under which it was willing to give its consent to the sale; that the acquisition be financed with international financial capital rather than debt, that the process be supported by all creditor banks and that the buyer support Mercator's further development.
Balažič expects these conditions can be met, but he said that potential non-fulfilment of the conditions could affect the management's opinion on the publication of the takeover bid.
Agrokor signed an agreement to buy a 53% stake in Mercator on Friday with a consortium of 12 shareholders that included beverage company Pivovarna Laško and the state NLB bank.
Balažič said the move was the first step to the stabilisation of the ownership structure that would enable the company to focus on its activity as well as to become an integral part of the consolidation in the region.
The sale could also help the deleveraging process - Mercator currently has a debt of nearly EUR 1.1bn - as the company would benefit from part of the synergies from the creation of a leading retailer in the region.
"The creation of these new values will contribute to Mercator's easier deleveraging," the chairman said, adding that this was an element in the ongoing talks with the creditor banks on debt restructuring.
Balažič does not deem it feasible for the sale process to be completed before the first quarter of 2014. During this time, Agrokor will have no influence on Mercator's operations.
An independent adviser will be engaged to determine the tie-up with Agrokor, who will be responsible to Mercator and will also negotiate with the banks.
The sale will also need the regulatory approval in all the markets of both companies. Balažič estimates that the combined market share does not exceed 30% in any of the markets.
Meanwhile, Mercator's supervisory board endorsed additional marketing and cost-cutting measures proposed by the management to improve the company's performance. No additional layoffs are planned.
The measures include a continued focus on Slovenian-made products, which are to keep 70% of the shelf room at Mercator shops, as well as a reduction of costs of material, services and energy.
Source: The Slovenia Times
