Private equity flows into Croatia

By bne IntelliNews January 27, 2010

Guy Norton in Zagreb -

It's clearly not just tourists that find Croatia an attractive destination; private equity firms have also upped their interest in the country.

The latest deal in the Croatian alternative investment market came in early January when local player Nexus Private Equity Partners purchase 100% of drugstore chain Kozmo from leading retailer Konzum, owned by Croatia's richest man Ivica Todoric. Established in 2005, Kozmo has 43 stores with 240 workers and it is believed that Todoric has been looking for a buyer since July, having 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 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 €36m from a mix of institutional investors, high net-worth individuals and corporate investors. The fund is the largest private equity fundraising Croatia to date.

Founded in 2008, Nexus provides private equity and venture capital financing in three key areas: real estate development; equity investments in medium- to large-sized organizations undertaking expansion; and seed financing for entrepreneurs and start-up 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 current economic crisis will increase the demand for Promotehna's products given that owners are more likely to maintain and repair current vehicles rather than buy new ones. In 2009, new car sales in Croatia plummeted by over 50%.

Good times

Meanwhile, 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. 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 as there's an increasing acceptance of international buyers and management teams."

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