It’s not just tourists that find Croatia an attractive destination, private equity firms have also increased their involvement in the country recently.
The latest deal in the Croatian alternative investment market involved local player Nexus Private Equity Partners purchasing 100% of drugstore chain Kozmo from leading retailer Konzum. Konzum is owned by Croatia’s richest man, Ivica Todoric. Established in July 2005, Kozmo has 43 stores with 240 workers and it is believed that Todoric has been looking for a buyer for it since July. He decided that Kozmo was struggling to compete with the market leader in Croatia, Germany’s Drogerie Markt, which has around a 25% market share.
Nexus board member Marko Makek, however, believes that there is more than enough scope for Kozmo to develop further and Nexus is looking to double the size of its network over the next two years. The purchase was funded through the Nexus Alpha Fund, which had its first close in October 2008, raising €36 million from a mix of institutional investors, high-net-worth individuals and corporate investors. The fund is the largest private equity fundraising in Croatia to date.
Investments rise
Founded in 2008, Nexus provides private equity and venture capital financing in three areas: real estate development, equity investments in medium- to large-sized organizations undertaking expansion; and seed financing for ventures with high growth potential.
Nexus closed its first investment in August, providing an undisclosed amount of expansion capital for car-parts distributor Promotehna. Nexus believes the economic crisis will increase the demand for Promotehna’s products given that owners are more likely to maintain and repair their vehicles than buy new ones. In 2009 new car sales in Croatia plummeted by more than 50%.
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“These are good times for the private equity business in Croatia – there’s an increasing acceptance of international buyers and management teams” Michael Glazer, Aucris |
In addition, UK-based Carlson Private Equity has completed a buyout of minority shareholders in troubled Croatian steel mill Zeljezara Split (ZLIS). In December, Croatia’s financial watchdog, Hanfa, approved Carlson’s purchase of a 95.86% stake in ZLIS, conditional on it launching the mandatory offer to minorities. Carlson, which specializes in turning around financially distressed firms, bought its majority stake from Polish steelmaker Zlomrex, which acquired the firm in a privatization tender in 2007. Since the economic downturn in 2008 the fortunes of ZLIS have plummeted, causing the firm to be declared insolvent and production to be halted. In the summer workers from the firm staged a hunger strike to highlight the plight of the company. In the first nine months of the year, it recorded a loss of K79.6 million ($15.5 million), four times higher than in the previous year. Artur Jedrzejewski, managing director at Carlson, says it hopes to restart production by the end of the year.
Commenting on the prospects for private equity in Croatia, Michael Glazer, founder of investment banking boutique Aucris in Croatia, says: “These are good times for the private equity business in Croatia – there’s an increasing acceptance of international buyers and management teams.”
