Unions demand end to asset stripping buyouts

The Union of Free Trade Unions of Slovenia (ZSSS) has demanded tougher legislation to stop firms being asset-stripped after management buyouts. ZSSS has written to parliament setting out its concerns about job losses and the destruction of companies. Some laws have been amended but unions insist further action is needed, including publication of a secret government report. Slovenia’s shares and security markets regulator recorded 215 buyouts between 1998 and 2010.


The Union of Free Trade Unions of Slovenia (ZSSS) has warned several times that poorly regulated management buyouts and monopolistic practices still occur in Slovenia – frequently in the construction industry (SI1108019I).

There have been two particularly notorious cases of management buyouts in recent years.

  • The takeover of brewing company Pivovarna Laško by four companies, Infond Holding, CPM, Fidine and Koto. In a complex series of company takeovers, Boško Šrot, Chief Executive Officer (CEO) of Pivovarna Laško, and his wife Anica Aužner Šrot bought the finance company Kolonel through another company Atka-Prima for €16,000. A few days later, Kolonel announced the takeover of a further company, Center Naložbe, which later became the biggest owner of the finance company Infond Holding. This company, in turn, took the largest share in the joint takeover of brewers Pivovarna Laško. On 18 December 2009, Maribor district court initiated bankruptcy proceedings against Infond Holding (owned by Boško Šrot). A few months later, on 13 August 2010, the court also initiated bankruptcy proceedings against Center Naložbe. A bill of indictment was also issued against Boško Šrot, ordering his companies Infond Holding and Center Naložbe to repay an estimated €109 million loaned to them by the brewery company. The loans were not repaid and Slovenia’s government has had to underwrite the brewery with a bank guarantee, costing the public purse €447,705,512.
  • The takeover of retail and construction materials company Merkur by Merfin was the biggest and the most costly management buyout in Slovenia’s history. Bine Kordež was CEO of Merkur and headed the team that bought out the company at the end of 2007. The takeover was coordinated through a new company, Merfin, set up by 65 members of the Merkur management team with the help of some of the company’s co-owners, such as Sava Kranj and Banka Koper. Merfin’s takeover plan attracted loans of around €350 million from the banks. After the revision it came out that Merkur had debts of €750 million and practically no assets, and was insolvent. The damage was estimated to be around €180 million. This company was also underwritten by a bank guarantee at a cost to the state of €114 million.

Catastrophic effects of management buyouts

The Bank of Slovenia’s Securities Market Agency (ATVP) monitors the country’s securities and shares markets to ensure compliance with national financial law and regulations. ATVP recorded 215 management buyouts during 1998 and 2010. Of these, 197 were given bank guarantees, totalling €5.6 billion. The amount of loans given for management buyouts by the state-owned New Bank of Ljubljana (NLB) were:

  • €421 million (in 2005);
  • €639 million (2006);
  • €1.4 billion (2007);
  • €1.7 billion (2008);
  • €1.6 billion (January-March 2009).

Janez Prašnikar, Professor of economics at Ljubljana University, said that between 2006 and 2009, companies that had been taken over experienced:

  • a 75% increase in their debts;
  • a 99% fall in profits.

He added that in 2009 in general they were operating at a loss.

As a result, these companies had been unable to repay their loans and the banks that had underwritten them had accumulated a lot of bad debt. Taxpayers had to pay for the recapitalisation of these companies.

Slovenia is facing a flood of insolvency procedures, putting the NLB under pressure to set aside cash for debt write-downs. The NLB has been seeking a €400 million recapitalisation of its own business, but media reports suggest it is uncertain whether it will get the full amount because the bank’s principal shareholders, the State and Belgian financial group KBC, have not yet come to an agreement. Reports suggest €250 million is a more likely figure. The European Banking Authority (EBA) estimates the Slovenian banks need €300 million in fresh capital by mid-2012. It also warned that Slovenian banks needed to boost their Tier 1 capital ratio to 9%. Some banks meet this criterion already, but others, including the NLB, do not.

ZSSS demands

On 31 January 2011, ZSSS wrote to parliament and the government asking them to:

  • introduce the legislation necessary to make possible a full review of all company takeovers carried out up to 31 December 2010, to find out whether they complied with existing legislation, and to make the findings of these reviews public;
  • take proceedings against those responsible for any violations of existing legislation where, for instance, takeover procedures have not been transparent, there has been purposeless crediting of company takeovers, or where insufficient control has been exercised by the Bank of Slovenia over any purposeless crediting;
  • amend existing legislation and adopt new legislation to prevent any further takeovers of this kind;
  • identify those responsible for breaching such legislation and take appropriate legal sanctions, including the confiscation of property;
  • complete a report on asset-stripping management buyouts as the parliamentary commission that was set up for this purpose was not able to finish its job and no report has been published to date for the general public.


All trade unions want the reintroduction of the rule of the law in relation to management buyouts in Slovenia. The current situation has led to the taxpayer being burdened with the cost of rescuing insolvent companies, and the unions believe that ultimately the living standard of workers is being diminished by asset-stripping takeovers while some individuals are able to amass huge private fortunes.

On 2 November 2011, the parliament (state assembly) adopted the amended Company Law (CL). Among other things, the amended CL made it impossible for the co-owners of insolvent companies to set up new companies.

The parliament also adopted an amended Penal Law (PL). The amended PL includes stronger sanctions against criminal offences concerning economic crime (new sanctions concerning false bankruptcy and tax evasion) and introduces a new criminal offence for doing damage to public funds.

The parliament also adopted a new Law on Dispossession of Property of Illegal Origin (LDPIO) which makes it possible for the prosecution authority to carry out a financial investigation for the previous five years. It also includes a penal procedure and possible temporary property confiscation.

According to the website of public broadcaster RTV Slovenia on 24 November 2011, the caretaker government announced at its press conference that it intended to submit the amended CL, which would come into force on 29 November 2011, to the Constitutional Court to assess its constitutionality. At the same time, the caretaker government proposed to put a stay on the execution of the amendments to the CL because the intervention into constitutional rights was not proportional and it was not possible to introduce the amendments entirely.

Štefan Skledar, Institute of Macroeconomic Analysis and Development

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