The Croatian government put pressure on insurer Allianz and threatened it with regulatory action after a local pension fund it controls pulled out of a deal that involved a €500mn payment to Kremlin-controlled Sberbank.
The Russian bank has been trying to find a buyer for its 42.5 per cent stake in Fortenova, a retailer and food producer that is Croatia’s biggest employer, with 45,000 staff and €5.2bn of sales, and a key food supplier across the region.
The government’s preferred option last autumn was for Sberbank to sell to a group of Croatian pension funds, the biggest of which was AZ, a fund that is 51 per cent owned by Allianz. Italy’s UniCredit owns a minority stake.
The transaction, which valued Sberbank’s stake in Fortenova at €500mn, collapsed when AZ walked away last October after Allianz decided against the deal because of concerns it could breach EU sanctions, people familiar with the details told the Financial Times.
Allianz told the FT that AZ’s supervisory board “took the independent decision not to pursue the Fortenova investment case because its risk and return profile was wholly unsuitable for pensioners, and because its financial structure presented potential compliance risks that it considered unacceptable”.
Croatia’s foreign minister Gordan Grlić-Radman and the country’s German ambassador Gordan Bakota subsequently lobbied various Allianz executives, according to the people.
Grlić-Radman urged Allianz board member Klaus Peter Röhler to overrule the decision, arguing Fortenova was crucial to the wider Croatian economy.
The Croatian foreign ministry in Zagreb did not respond to FT requests for comment. The country’s embassy in Berlin declined to comment.
When Allianz refused to reconsider, Croatia’s financial watchdog Hanfa in November issued what one of the people called “explicit threats” against the German company’s local business.
Hanfa asserted that if governance and risk management controls were found to be flawed this could result in a fine and the replacement of local management, the people said.
Weeks later, the regulator started an on-site inspection of AZ, saying it was a regular audit of decision-making processes, controls and its handling of cyber risks, the people added.
Asked about those events, Hanfa declined to comment in detail, telling the FT that its “examination of the pension company Allianz is still under way” and adding “we will inform the public of the outcomes of the examination after it has finished”.
Sberbank is Fortenova’s biggest shareholder but the sanctions fallout from Russia’s full-scale invasion of Ukraine last year has made this structure problematic and the refinancing of the group’s €1bn in debt more complicated and expensive.
The German government has been briefed about the pressure put on Allianz by Croatia’s government and Hanfa, the people said. A German government spokesperson told the FT that it would not “comment on internal entrepreneurial decisions [or] on the content of confidential discussions with representatives from other countries”.
Allianz said it would not comment “on interactions with government authorities” but added that it made “decisions based on their merit, in line with the company’s values and duties to its clients”.
Fortenova’s chief executive Fabris Peruško declined to comment on the Croatian government’s actions, but said: “The situation we are in today is because of the deal we didn’t execute in October,” he said. “If we had, today we would be refinanced and focusing on our business exclusively.”
The big concern for Allianz, according to people with knowledge of the company’s view, was that while the transaction was designed to comply with the letter of EU sanctions it would have violated them in spirit because it involved a payment to a Kremlin-controlled business.
Allianz was also put off by Fortenova’s financial record, the people said. The company was restructured in 2017-2019 after its predecessor, Agrokor, piled up losses and defaulted on more than a billion euros of loans. Fortenova has turned profitable again since and its revenues are stable.
Sberbank was a major creditor of Agrokor and became Fortenova’s biggest shareholder in a debt-to-equity swap that was part of the Agrokor restructuring process.
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