LJUBLJANA (Reuters) — A decade ago,
with Slovenia cruising towards membership of the European Union, a
local brewery called Union caught the eye of Belgian beer giant Interbrew.
Union and its larger rival, Lasko <PILR.LJ>, are national treasures
in Slovenia, a question of allegiance that divides beer drinkers the
same way soccer splits Manchester between City and United.
Determined to keep Union in Slovenian hands, the country used every
trick it knew to thwart Interbrew's advances.
Finally it gifted Union to Lasko, brushing aside complaints from
Interbrew and creating a monopoly that to this day controls 80
percent of the Slovenian beer market.
Then came the hangover.
Ten years and millions of euros in accumulated debt later, Lasko is
one of dozens of companies controlled directly or indirectly by the
Slovenian state that face being sold in a fire sale of national
assets to steady the country's finances.
If all goes well, Slovenia will avoid becoming the latest euro zone
country to need a bailout. Its battle is a reminder that the euro
zone debt crisis is still casting shadows.
"We reckoned we all stood to profit," Dusan Siljan, a former head of
sales at Lasko who retired this week, said of the merger with Union.
"There would be no competition and, together, we had a better chance
of staving off a possible new takeover attempt by Interbrew," said
Siljan, who represents 1,000 small shareholders controlling around 5
percent of the brewery.
Now, he says, Lasko risks being sold "far below the real price", as
Slovenia races to raise money, cut its deficit and reform the public
sector.
"PROTECTING NATIONAL INTERESTS"
The former Yugoslav republic of 2 million people, tucked below the
Alps, revealed a 4.8 billion euro hole in its mainly state-run
banking system two weeks ago, the result of loans turned sour when
exports hit a wall with the onset of the global economic downturn.
The government said it could plug the gap alone, without becoming
the latest member of Europe's troubled euro currency union to need
an international bailout.
But if the fix is to last, Slovenia must remake an economy
50-percent controlled by the state, and abandon a policy that kept
local firms in local hands while the rest of Europe's ex-communist
east threw open the gates to Western capital after the Cold War.
"Lasko followed the policy of 'protecting national interests',
tacitly supported by the government," said Borut Hocevar, an editor
at the Slovenian business daily Finance.
But as the company's troubles grew, its share price steadily fell
from almost 100 euros ($140) in 2007 to a little over three euros
now. "Not selling my shares was the biggest mistake of my life,"
said Siljan.
Slovenia now plans to abandon stakes in 15 companies, including the
biggest banks, the local telecoms provider and national carrier
Adria Airways. Unemployment, already over 12 percent, is likely to
rise.
CRIPPLED BY DEBT
Lasko, though not on the list, is nevertheless at the mercy of its
chief owners — state banks now looking to divest.
In a complex ownership scheme typical of many Slovenian companies,
eight banks jointly control more than 50 percent of Lasko and may
have to sell their stakes as part of their own restructuring.
Lasko's current market valuation of around 31 million euros,
however, is dwarfed by debts almost 10 times that amount. A
supervisory board meeting last week acknowledged Lasko was
struggling with short-term liquidity. The brewery declined to
comment for this article.
Saso Stanovnik, chief analyst at leading Slovenian brokerage Alta,
told Reuters:
"The most likely outcome is to find foreign buyers, possibly some
European breweries, for parts of the Lasko group. With this, the
story about 'national interest' in Lasko would have a very ironic
ending, but probably a useful one for its further development."
But even at a knockdown price, Lasko, one of the biggest breweries
in the Balkans, may struggle to find a suitor.
Under a previous management, Lasko went on a spending spree that saw
it acquire a mineral water bottler, a spa and juice producer Fructal,
which it has since spun off.
It also has stakes in a daily newspaper and almost 21 percent of
leading retailer Mercator <MELR.LJ>, itself a takeover target of
Croatian rival Agrokor.
"With the previous management, we were buying left, right and center
and neglected our core business. If we had focused on that, today we
could rightly say, 'recession? What's that?'," said Siljan.
NO FOREIGN SUITORS YET AS BANKS LOOK TO SELL
Reports in local media have homed in on Turkish brewery Efes. But
Tuncay Ozilhan, chairman of Anadolu Group <AEFES.IS> that owns Efes,
told Reuters: "I am familiar with the company, I know Lasko, but no,
it's not true. We are not interested in buying it."
Heineken <HEIN.AS>, also mooted as a possible buyer, declined to
comment.
Lasko's biggest shareholder, top state-owned bank NLB with 23
percent, declined to reveal its plans.
But local media said it would transfer its stake to a "bad bank"
created by the government this year to ring-fence billions of euros
in bad loans and unburden the banks for easier sale. The bad bank
could hold on to Lasko or, more likely, sell it on.
Another bank, Nova KBM <NKBM.LJ>, told Reuters it would definitely
sell its holding in Lasko when it decides the time is right.
Hypo Bank, which has seven percent, said its main aim was "to
provide quality financial services rather than own stakes in
companies" — a sign it too may be pulling out.
In the first nine months of this year, Lasko posted an operating
profit of 26 million euros, down 11 percent on the previous year.
The net loss of 10.8 million euros was halved from last year's
nearly 22 million euro loss.
Workers at Union, located in a sprawling green and grey complex just
off downtown Ljubljana, were reluctant to discuss their fate. "You
should ask the management about that," said one.
But Andrej Skorja, a trade union leader, said there was little doubt
where the future lay.
"Foreign owners? That is effectively our future. I see no other way,
and we're ready for it. The only issue is whether it will create
problems for ... the employees."
($1 = 0.7296 euros)
(Additional reporting by Almir Demirovic,
Ceyda Caglayan and Martinne Geller; editing by Matt Robinson and
Janet McBride)
