Boško Šrot Regroups, Tries To Sell Mercator and Buy Večer

As you already know, Boško Šrot of Laško Brewery announced his intention to sell the 48 percent stake in Mercator he controls. But just to freshen your memory, allow me to re-post the two relevant paragraphs from Tuesday’s post:

Boško Šrot: What’s more important. Beer, retail or newspapers?

(..) Boško Šrot of Laško re-entered the limelight, apparently seeking to cash in on the change in governement as well as on the economic crisis. As you might know, he and his dependant companies own as much as 48 percent of Mercator, the largest reatil chain in Slovenia. Šrot got hold of Mercator for a below-market price in exchange for ceeding control over Delo newspaper to Janez Janša and his SDS. He later double-crossed Janša who, in respoce, started his famed “war against tycoons”, the only real result being that Šrot, his Laško Brewery and Mercator are being investigated for alleged cartel agreements.

Now, Šrot is “threatening” to sell his 48% percent stake in Mercator if the government agencies do not back off and hinted that he would be willing to sell it back to the state. Hopefully the new PM will not fall for the same trick his predecessor did and will not finance Šrot’s MBO of Laško by buying back Mercator at a markup price. Pengovsky smells an out-and-out foul play here (..)

There’s more, however. Only hour after pengovsky published the above, Delo newspaper announced that it bought almost 80 percent of Večer newspaper. Now, Delo is owned by Laško, meaning that if Delo indeed takes over Večer, Laško would control three out of four most influential daily newspapers: Delo and Slovenske Novice (a tabloid), both published by Delo, as well as Večer, whose influence in Štajerska region is unparalleled.

The motivation behind the move to sell Mercator is still being questioned. Is Boško Šrot running out of money to finance the MBO of Laško, trying to pre-emptively dicsipline the new government or pull the same trick twice:

Officially, Šrot says that he is selling Mecator because the regulators are “terrorising his company” and that he’s had enough of it. Were the new government to put a leash on regulators, however, Laško might be persuaded not to sell half-a-billion-euros-worth of Mercator stock, quite possibly to a foreign owner. The last sentence resurrects the debate of national interest in economy. Interestingly enough, when Laško and Interbrew were locked in a battle for Union brewery in 2002, it was Boško Šrot who lauched the theme, saying that it was waaay better for Slovene companies to be owned by Slovene capital – that this was in our national interest, so to speak.

Boško Šrot won the “brewery wars of 2002”, but this time around, it seems the “national interest” will be a tough sell. Namely – The state does not own either Laško or Mercator anymore, meaning that it has little or no interest vested in Mercator. Some say that the new (foreign) owner would drastically reduce the number of employees and limit access of Slovene food and drinks producers to Mercator’s shelves, threatning an entire branch of Slovene economy.

Which is a load of bollocks (I seem to be using the phrase a lot lately)

Mecator has a 36% market share in Slovenia and the number of employees is by now no doubt “optimised”, i.e.: overworked and underpaid. There will be precious little a new owner will be able to do in that department. As far as Slovene food and drinks producers are concerned, things are even more simple. If the new owner wil indeed try to squeze Slovene products out, it will soon be faced with declining sales and in turn declining profits, not to mention the fact that other retail chains will be more than happy to re-employ the old “Buy Slovene!” approach and increase their market share.

So, why should the government fork out half a billion euros to finance Šrot’s MBO of Laško, just to reacquire Mercator. Should this happen, Mirko Tuš, owner of Tuš retail chain would rightfully ask “what about me!”. Mercator is not a company at peril (not yet, at least) and there is absolutely no reason for the state to cough up the money. There are more pressing issues for the new government to address with taxpayers’ money.

The presumptine new minister of economy, Matej Lahovnik, already said that there is no reason for the state to buy Mercator:

“I don’t see a reason for the state to buy [Mercator] back at the same price it sold it three years ago. Even if we did buy it, we’d be faced with the question, what to do with it in the coming months (…) We’d have to sell it again. Are we to buy it back again in four years at a higher price? It makes no sence, so the state will not buy Mercator back. Unless the price would be lower. In that case the purchase might be possible”

As far as Delo’s takeover of Večer is concerned, however, things are both clearer and a lot more murky at the same time. The takeover is definitely illegal, as Delo did not get an approval to increase its share in Večer above 20%. The approval is issued by the minister of culture and under pre-2005 legislation it was automatically rejected if the combined media companies exceeded certain limits in terms of market share and/or reach. When Janša’s government changed the Law on media, it also changed this particular article. Under current provision the decision whether or not to allow media concentration or not is made solely at the minister’s discretion. Which naturally opens the road for some heavy lobbying and even top-level corruption.

The presumptive new minister of culture Majda Širca (like Lahovnik, she too is a member of Zares) did not take a position on this issue, but I would expect her to uphold the decision of the outgoing minister Vasko Simoniti, who rejected any possibility of allowing the concentration and even filed criminial charges, and notified the Market Protection Office.

And after she does that, she might want to re-examine the media conentrations that were allowed under tenure of Vasko Simoniti. And those before him…

BTW: If you’re interested on how the new minitster sees the new role of RTVSLO, click here (Slovene only)