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The long-running saga surrounding the fate of Mercator, Slovenia's leading retailer, has taken yet another twist with the surprise resignation of the firm's management board ahead of the firm's general shareholder assembly on March 30.

Chief executive officer Ziga Debeljak and four other Mercator board members offered to relinquish their posts - as of September 1 if not replaced earlier – in the face of a disagreement with leading shareholders over the proposed sale of a majority stake in Mercator to Agrokor of Croatia, which owns rival supermarket chain Konzum.

While Slovenia's largest drinks firm Pivovarna Lasko and a number of domestic banks had been in favour of selling a 52% holding in Mercator to Agrokor last year, the sale had been vigorously opposed by the firm's management, with Debeljak instead favouring a bid by Mercator to take over Konzum. In November, Debeljak and the rest of the management board refused Agrokor permission to perform due diligence on Mercator because its subsidiary Konzum was its biggest regional competitor.

It came as little suprise then, when in February Agrokor reluctantly withdrew its €221 per share offer for the controlling stake in Mercator, which valued the Slovenian company at €832m, citing growing uncertainty over the outcome of the lengthy negotiations surrounding its bid, which had been supported by a consortium comprising the European Bank for Reconstruction and Development, the International Finance Corporation and One Equity Partners, the private equity arm of JP Morgan Chase. The uncertainty over Agrokor's bid had been heightened by growing Slovenian opposition to Agrokor's approach, with local politicians and trade unionists warning that if Agrokor gained control of Mercator, it would put Slovenian jobs in the retail and agricultural sector at peril.

Controversy over the potential sale of Mercator to its Croatian rival had already claimed the scalp of the country's leading banker, when Bozo Jasovic, chief executive officer of Nova Ljubljanska Banka (NLB), stepped down in the face of criticism that NLB, the country's leading bank, should be involved in delivering a flagship Slovenian enterprise such as Mercator into foreign hands.

Commenting on its decision to resign en masse, the Mercator board issued a regulatory statement to the Ljubljana Stock Exchange stating: "Certain events in the past and current year have, due to different views on certain elements of the sale of the company to its biggest competitor, resulted in a mutually diminished level of trust between the management board and certain important shareholders. Therefore, it is the assessment of the management board that its ability to efficiently conduct normal business and regulate relationship with business partners and other stakeholders has been impaired."

News of the management board resignations gave an immediate fillip to Mercator's share price, which had fallen by 25% following the failure of the Agrokor bid. On Friday, March 30, Mercator's stock price climbed by almost 10% - the biggest rise in 12 months - to close at €137 on the back of speculation that the sale of Mercator could again be on the cards. For its part, Agrokor, declined to comment on the resignations or say whether it would revive its bid to gain long-cherished control over Mercator, which it has been eying for a number of years.

In a note to clients, Saso Stanovnik, head of research at Slovenian brokerage Alta Invest, said the Mercator board's resignation would likely increase the likelihood of Mercator being sold as well as arguably improve the retailer's financial prospects "This means the sale process could again gain momentum," said Stanovik. "We hope this conflict between the management and the owners will be resolved soon, otherwise business results could further deteriorate."

Ahead of his resignation, Debeljak had warned that Mercator faced its toughest ever year in the face of Slovenia once again lapsing into recession and consumers likely to rein in spending. Last year, Mercator, which beyond being the number one retailer in Slovenia also operates in Croatia, Bosnia and Herzegovina, Serbia, Montenegro, Bulgaria, Macedonia, Kosovo and Albania, generated revenue totalling €2.93bn, up 5.3% on 2010, thanks mainly to its international operations. However, profits dropped 22.5% to €23.5m.

In order to boost its balance sheet in the coming years, Mercator hired real estate consultancy Cushman & Wakefield in November to advise it on the sale and leaseback of properties in Slovenia and Croatia in 2012 and 2013, which is forecast to garner €500m that will be used to cut the company's indebtedness which stood at roughly €1.1bn at end-2011.

Meanwhile, according to Slovenian business daily Finance, Debeljak is in the running to take the helm at another Slovenian flagship firm, white goods manufacturer Gorenje.