Miodrag Šajatović: Dangerous Thesis on the Disassembly of Agrokor into a ‘Series of Strong Companies’

This column is being written on April 12. Unlike last week’s, written in an atmosphere of panic due to the uncontrolled collapse of the components of the Agrokor group and the company as a whole, and the most serious threat of a domino effect that could push the Croatian economy back into recession, this text is being created in a much calmer business environment. With the activation of ‘lex Agrokor’ and the entry of the state’s extraordinary commissioner Ante Ramljak into Agrokor, confidence has, at least temporarily, somewhat returned.

Those who have experienced this themselves or have witnessed similar downfalls of fundamentally healthy companies, but which were poorly managed financially, know that, in fact, only a little fresh money is needed to stabilize operations in the short term. This is happening, for example, in Konzum, which generates revenue of about 25 million kuna every day.

Bankers Recognize Potential

The fact that bankers and other investors are willing to further finance the struggling and heavily indebted Agrokor system shows that the potentials of the system, once it is isolated from old debts, are actually significant.

The government of Prime Minister Andrej Plenković should be acknowledged for having, after previous dramatic delays in decision-making, played this opening of a long-term not entirely secure game well. With the note that it will take time before a complete picture of the circumstances that caused the escalation of Agrokor’s collapse and the departure of founder Ivica Todorić from the position of CEO of the largest group in Croatia is established.

There are still many threats, especially regarding Agrokor’s parts outside Croatia, which are not under the glass bell of protection according to ‘lex Agrokor’.

At this point, I would like to focus on this week’s statement by the leader of Most and President of the Parliament Božo Petrov, which states: ‘I believe that all Croatian companies, when those from Agrokor enter the market, should participate in the purchase because I believe that we do not need one giant, but a series of strong Croatian companies. If we set the rules this way, we lay healthy foundations for the economy and market competition.’ Božo Petrov touched on a very important topic for the future of the Croatian economy. But in a completely wrong and dangerous way.

It is time to finally open a professional, but also political discussion about what the desirable structure is when it comes to the size of companies in Croatia. But to claim, without presenting any analysis, that Croatia ‘does not need one giant’ is extremely irresponsible. First, the division into ‘giants’ and ‘strong companies’ is confusing. Can’t a giant be a strong company? It would be more logical for Petrov to have spoken, if he has already touched on this topic, about giants and, say, medium-sized companies (according to standards in Croatia). Furthermore, it turns out that the leader of Most claims that any large national company is contrary to the healthy foundations of the economy.

Giant – Risk or Locomotive

Perhaps it would be so if, naively, the Croatian economic scene were viewed as closed off from itself. Without the realization that it is part of a global world in which there is currently a trend of creating truly gigantic systems.

Having a ‘giant’ in the national economy is risky if such a system is poorly managed. But if a capable state dialogues in a timely manner with the leadership of a private national ‘giant’, if recipes that are in place in most successful countries are applied (today, countries are increasingly competing as business systems), then a giant-locomotive can significantly raise the growth potential of the national economy.

It would be interesting to analyze whether there is anyone in the ruling Hungarian political structure who advocates for the disassembly of Mol into a series of ‘strong Hungarian companies’. Namely, Mol, with more than 16 billion euros in revenue (Agrokor 6.4 billion euros), according to some calculations, corresponds to the size of 20 percent of Hungary’s GDP. Or, is anyone in the Czech Republic suggesting that the giant Škoda (with more than 11 billion euros in revenue) be split into several smaller companies to create healthy foundations?!

Capacities in the food industry are dramatically increasing. The production capacities of Led are ridiculously small compared to Lidl’s and Nestlé’s joint ice cream factory. Even with a potent, financially cleaned, and well-managed regionally represented Konzum, the domestic food industry is highly endangered. Without a ‘giant’, most domestic medium-sized companies are in big trouble. Perhaps it is best for politician Petrov to reformulate his ultimate and unfounded demand for the disassembly of Agrokor into a hypothesis that needs to be analyzed. Let this be an incentive first for professional discussion and only then for political debate. This should have been conducted a quarter of a century ago.