Palladio Finanziaria gives up on acquisition of Slovenia’s Cimos

Palladio Finanziaria gives up on acquisition of Slovenia’s Cimos
By bne IntelliNews February 21, 2017

TCH Cogeme, a subsidiary of Italian investment fund Palladio Finanziaria, has cancelled its acquisition of Slovenian automotive supplier Cimos, Slovenian Bank Asset Management Bank (BAMC), a coordinator for the sale, said on February 20.  

The sale was seen as vital to the survival of Cimos, a major employer in both Slovenia and Croatia whose collapse would have a negative impact on the Slovenian economy. 

According to BAMC, the investor gave up because no agreement was reached between BAMC and the Croatian state agency for deposit insurance and bank resolution (DAB) over Cimos’s outstanding debt to Croatia's Rijecka banka. The Italian company was expected to pay €110mn for a 92% stake in Cimos. 

This has brought to an end the months-long saga of TCH’s attempt to buy Cimos. The latest announcement was unexpected as earlier in February, the Croatian government gave the go-ahead to a deal to settle Cimos's debt in Croatia. Under the deal, BAMC would have paid €7mm for the company’s debt. 

“Because the dispute between Cimos and DAB is still not resolved [the buyer] is withdrawing from the transaction," said a statement issued by TCH Cogeme on February 20, Slovenian Press Agency (STA) reported.

The standoff had appeared to be resolved at several points, but problems kept cropping up in talks between the Slovenian and Croatian bad banks and both governments, STA reported. 

First, the negotiators were unable to agree on the price at which the debt, worth €20mn when it was taken out in the 1990s, would be valued. When the price, reportedly €7mn, to be paid by the Slovenian bad bank was agreed, Croatia raised concerns about what it perceived as lax covenants regarding the fate of workers and suppliers at Cimos's Croatian subsidiaries.

The two sides then resolved the covenants, but another issue surfaced: deeds on land owned by Cimos in two locations in Croatia, which are being challenged by the Croatian state attorney's office.

Cimos is currently good shape following a €168mn debt-to-equity conversion in 2014, but has had trouble securing new long-term deals in the absence of a strong owner.

The fate of about 4,000 workers, over a quarter of them at Cimos subsidiaries in Croatia, now hangs in the balance.

Cimos, which is seated in the town of Koper, is one of the largest industrial companies in Slovenia. A calculation made by the central bank in 2013 showed its bankruptcy could shave over a percentage point off Slovenia's GDP, according to STA.

“The sales agreement with TCH Cogeme is important for Cimos for many different reasons. Firstly, it is crucial for Cimos, its workers and its customers because it will support the group’s future business. Secondly, it is vital for the Primorska region because Cimos is one of very few companies in this region that is on the way to future success. Thirdly, under the new owner, Cimos will return to be an important player in automotive components industry, which will provide beneficial long-term effects for the Slovenian economy,” said Imre Balogh, CEO of BAMC, on October 14 when the deal to sell the company was signed.

Cimos significantly improved its results in 2015, reaching €172.03mn net profit. In 2014 the company posted a loss of €53.3mn.

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