Sale of Končar Complete, Pension Funds Now Hold 45% of Stock

Total Croatia News

Although stock remained in domestic ownership, it is a surprise the state is willing to give up such a market leader

The Management Board of the Centre for Restructuring and Sale (UV CERP) has ruled on selling 20.4% of state-owned stock of Končar-EI to pension funds, for a total of 360 million Kuna, reports Večernji list on June 3, 2016. All four funds were the only ones with offers on the table.

The transaction will take place in the Zagreb Stock Exchange, after which the pension funds will hold around 45% of stock in Končar.

Prime Minister Tihomir Orešković announced a few months ago that the sale of state-owned assets will generate around two billion Kuna income – 1.6 billion from stocks and 684 million from property, to reduce public debt and deficit. Although there was talk of this amount being generated from the sale of stock in tourism companies, it was clear from the start that it wouldn’t happen as those stock is unsuccessfully on sale for years.

So it was a logical move to transfer companies of special and strategic value to the CERP list of companies for sale. First on the list are Končar and Croatia Osiguranje, and due to resistance the sale of ACI will have to wait, especially so in Podravka. A protest occurred already for the sale of Končar, but the people should be comforted by the fact that stock went to the pension funds, meaning that citizens, many of whom are obliged to pay money to the funds, came into indirect ownership of the Končar stock.

Although stock in Imperial and Maestral were on sale on several occasions, 15 unbinding offers were received at the end of last year, but this time binding offers might show up too, to be known next month. The sale of Končar should have been decided on by the Managing Board on Thursday, but some members, among whom are representatives of ministries, unions and employers, were against the sale.

But at the session of Friday the decision was unanimous. With the current stock held by pension funds and with two representatives in the Supervisory Board, a change in the Board of Končar is not out of question, as some of them, as can be heard in the pension funds, fail to impress. The funds now have two reps in the Supervisory Board, likely to be four soon.

This Board has been running Končar for 18 years. Before that company losses were 50% of market value, while after that no loss was recorded. In the period of 18 years stock value has risen 15 to 17 times, while profit per capita by about 5%. Which means that whoever invested in Končar made five times the amount. Profit per transaction is around 6%, at the same level as European companies. Income rose by 15% last year, the two-year average of this growth will be 8.8%, while the world average is 3.1%, with around 2% in Europe.

Končar was founded in 1921, with strategic interest in electroenergetics and transport. In transport and distribution over 90% of the electroenergetic system pertains to Končar. And more than 90 hydroelectric plants in the country are made by Končar, while producing trains and trams as well. The Končar group is composed of 17 dependent and one adjoining company with around 3.700 employees. Most significant export markets are EU, neighbouring countries, Middle East, Africa…

A further 3.5% rise in export is expected this year. In January Končar signed a contract for three hydroelectric plants – in Bosnia&Herzegovina, Africa and South America. Končar representatives recently attended a business forum in Iran, where Končar is already doing business, in fact, even during the sanctions. There Končar has produced a slew of electric substations and hydroelectric plants, with interest in trains and trams…

The company is active in the domestic market as well – they’ve signed contracts with HEP, HŽ, extended their contract with Zagreb to maintain trams, not excluding production of new trams. Last year HŽ PP was delivered 16 electric trains for regional and city transport. Four more were delivered this year.


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