The Acquisition Wave Sweeping Slovenia: Who is the Next Target?

After Droga Kolinska and Lesnina, Nova Ljubljanska Banka is the third large Slovenian company that is expected to gain foreign owners in a very short time. Slovenian Prime Minister Borut Pahor, who is inclined towards selling to foreigners, believes that national interest cannot be measured against the interests of financial institutions.

writes Kristina Kardum
[email protected]

Nova Ljubljanska Banka (NLB) could, according to all indications, become the third large Slovenian company to gain foreign owners in a very short time. After Croatian Atlantic Group acquired Droga Kolinska last month, news broke about the sale of the wood processing company Lesnina for approximately 200 million euros to Austrian competitor XXXLutz. At the same time, Finance magazine reports that Goldman Sachs has set its sights on the largest Slovenian bank. Gorenje, which acquired a large Swedish competitor – Asko Appliances Group, has strongly opposed the trend of foreign acquisitions. The news of the acquisition of NLB came shortly after Nova Ljubljanska Banka barely passed the European banks’ stress test and proposed a capital increase of 400 million euros to its owners. The state has yet to decide whether it will independently secure fresh capital or opt for a sale. If the state stake, currently at 48 percent, is sold, Goldman Sachs will not be alone in its interest to purchase. Namely, a possible (and more likely) buyer for NLB is the Belgian banking and insurance group KBC, which already owns 30.6 percent of NLB and was rejected by the Slovenian government of Janez Janša in a previous attempt to become a majority owner in 2006. The explanation at that time was that domestic shareholders should have majority ownership as it aligns with the national interest of the state. Four years later, Prime Minister Borut Pahor believes that national interest cannot be measured against the interests of financial institutions and is inclined to hand over the majority stake to a foreign strategic partner. It is clear that the decision to abandon the sale is not as likely as in the previous case.

Identity Issues
Sources close to Pahor, as reported by Finance magazine, claim that the Slovenian Prime Minister advocates a solution whereby the Slovenian government, as the majority owner, would retain 25 percent of the shares and a ‘golden share’, so that the necessary capital increase of nearly half a billion euros would not fall on the taxpayers. Pahor stated that Slovenia is the only European country with a majority state stake in the largest bank and that he personally advocates a solution to hand over the majority stake to ‘a European consortium of banks or perhaps to some American bank’. Although some political forces will try to paint the decision to sell extremely negatively (the National Council of the Slovenian Parliament was against changes in the ownership structure and losing control over the bank in mid-July), it will very likely strengthen the bank and its positions in the region. Identity issues can hardly compete with the free capital market, especially when companies are opening new markets, jobs are retained, and money is entering the country. Not even a month after Emil Tedeschi acquired Droga Kolinska for just under 400 million euros, Slovenian media are praising the sale of Lesnina and congratulating its director Bojan Papić for making such a good move in these economically turbulent times. Some are a bit more cautious in assessing the managerial skills of Lesnina’s director, stating, like the daily newspaper Delo, that he probably had ‘more luck than brains’. Namely, one of the largest Austrian companies will pay Lesnina between 150 and 200 million euros according to the agreement concluded on July 28, and the entire management team will retain their current positions. The heads of XXXLutz and the director of Lesnina declined to comment in detail on the terms and are only awaiting the approval of the relevant authorities regarding the acquisition. The Austrians competed in the acquisition process with 15 other companies from around the world that were interested in the 25 percent market share of Lesnina in Slovenia as well as in its subsidiaries in Croatia and Serbia. On the other hand, Lesnina gains good backing from a reputable company with a similar business philosophy, as well as the necessary financial injection at a time when the furniture sales sector is experiencing a decline of one-fifth.
– The reasons for the sale of Lesnina were not the economic crisis or financial problems. I cannot claim that there was no decline in sales, however, the results are excellent for Slovenian circumstances – said Papić, who has not yet published the official results of last year’s operations. It is more likely that the situation in the company was not at all comfortable. In addition, banks began knocking on the door for loan repayments. Managers who became owners through the Slovenian model of privatization felt more pressure than they were willing to admit. Now, on the shoulders of the Austrian giant, Lesnina is opening numerous new doors, and banks on the other side of the table have a significantly stronger negotiating partner.

Gorenje’s Acquisitions
And while a false image is being created in Croatia that Slovenia is becoming a marketplace for the purchase of its domestic companies, Gorenje Group, the largest Slovenian manufacturer of white goods and the second largest Slovenian exporter, has acquired Swedish competitor Asko Appliances Group to increase its market share in the markets of Northern Europe and America. Asko, which was previously owned by the Italian group Antonio Merloni, produces high-tech washing machines in Sweden and cookers, ovens, and irons in Finland. The transaction was concluded just a day before the sale of Lesnina, on July 27 in Rome, and the price and details will not be known until mid-August. The position of Gorenje and the successful acquisition has undoubtedly been aided by capital from the World Bank. In fact, prior to that, in July, Gorenje received an investment worth 25 million euros and expects another five million in September. Additionally, it has been granted a loan of 100 million euros. CEO Franjo Bobinac announced at the beginning of the year that the money would be spent on acquisitions, restructuring, and the development of new products.
– The acquisition is of strategic importance for the company, enabling significant and faster growth in foreign markets – they state from the company in Velenje, emphasizing that the acquisition will not affect employees and production in the home country as Asko’s production only complements Gorenje’s product range.
– Production abroad will increase in the next few years to 40 percent from the current 26 percent, and in the longer term to 50 percent – announced Bobinac. Asko is, by the way, the eighth company that Gorenje has acquired.