Fortenova to Complete Consolidation of Mercator, Assume Its Debt

(Bloomberg) -- Croatia's biggest company Fortenova Grupa d.d. expects to complete the formal acquisition of Slovenian retailer Mercator Poslovni Sistem d.d. by the end of March in a transaction that will involve Fortenova assuming Mercator's debt and extending its existing bond facility with HPS Partner and VTB Bank by as much as 390 million euros ($469.5 million).

Shareholders of the Balkan's biggest retailer and food producer will vote on the proposal on March 12, the company said by email in Zagreb on Thursday. The formal transfer of Mercator, whose creditor banks have stalled the procedure, will complete the overhaul of Fortenova and allow it to consolidate the Slovenian retailer into its business.

The plan also would boost the stake of Fortenova's biggest shareholder, Sberbank PJSC, to 44%, after a share swap of the Russian bank's holding in Mercator for Fortenova's shares. That would make Russian entities, including another major shareholder VTB Bank, majority owners of the Zagreb-based conglomerate with extended production and retail business in the region.

Chief Executive Officer Fabris Perusko said he expects the transfer will be finalized by the end of this month.

Fortenova, a holding of food and retail businesses and the largest private employer in the region, concluded a state-led restructuring in 2018. The deal turned former creditors into owners, with Russian banks Sberbank and VTB together holding just below 50% combined. The new shareholders formally took over the company in 2019, when the firm changed its name to Fortenova from Agrokor.

In order to refinance its expensive rescue loan taken during the restructuring, Fortenova in 2019 issued 1.16 billion euros of bonds in a refinancing deal led by HPS Investment Partners LLC. That facility will likely be extended as Fortenova assumes about 380 million euros of Mercator's debt.

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