FT: Job Losses at Agrokor Will Be Politically Difficult, Regardless of Shareholder Nationality

The London court last week made a decision to extradite Ivica Todorić to Croatia to face charges related to fraud concerning Agrokor. The ruling is, according to the Financial Times, the latest twist in the largest European case of the past decade.

The decision of the London court was made two weeks after the main creditors of the group negotiated a settlement that is of exceptional importance for the entire region.

Even if the settlement is realized, much will be needed for the group to regain its former glory, and the settlement itself is tied to a series of political controversies given that the largest ownership stake in the group is held by the two largest Russian banks, Sberbank, to which Agrokor owes 1.1 billion euros, and VTB, to which it owes 300 million.

>>>The London court decided there are no obstacles to Todorić’s extradition

The entire story surrounding Agrokor unfolds simultaneously as tensions within the EU rise due to Russia’s efforts to strengthen its influence in the Balkans. Croatia, despite caution regarding potential Russian ownership of its assets when it comes to, for example, Ina, is currently facing Russian influence that penetrates deep into the economy.

However, the Russian factor should not pose the biggest problem as the draft settlement contains protective measures that should ensure that Sberbank and VTB, which could together hold about 44 percent of the ‘new’ Agrokor, cannot acquire more than 50 percent after the resolution is made. One of the measures is that the board should consist of directors selected based on skills, not employees of Russian banks.

>>>For Key Creditors of Agrokor, Guarantees Are Legal, and Claims Disputes Are Unfounded

VTB and Sberbank, just like other creditors, will seek to protect their investments, will have a common interest in hiring and empowering good managers, and will do everything they can to ensure the operational future of the company.

Todorić has appealed the London court’s decision regarding his extradition to Croatia, and ultimately it is the Croatian court that will decide whether there have been accounting irregularities, or even fraud, in the case of Agrokor, which Todorić of course denies. However, what has led Agrokor to this situation is poor management, ill-considered acquisitions, and unplanned expansion.

>>>Agrokor’s sales fell by 12 percent last year, loss still unknown

Business operations must be rationalized, and Konzum, which is under pressure from the strengthening position of competitor Lidl, requires special attention. Job losses will be politically difficult, regardless of whether the largest shareholders of Agrokor are Russians, Germans, or French. For Agrokor and the region, even in times of heightened tensions between East and West, the right decisions that would protect the business are more important than the nationality of the main shareholder, concludes the Financial Times.