Smejc to take over as PPF chief executive

Smejc to take over as PPF chief executive
PPF's appointment of Jiri Smejc could herald a resurgence of dealmaking by the financial group, as it tries to wind down its investments in Russia and Asia.
By Robert Anderson in Prague May 5, 2022

PPF Group, the Czech investment holding founded by the late billionaire Petr Kellner and now controlled by his widow Renata, has appointed Jiri Smejc, one of Kellner’s partners, as its new chief executive.

Smejc, a shareholder and chairman of PPF’s consumer credit company Home Credit, will on June 15 replace Ladislav Bartonicek, who has led the group since Kellner’s death a year ago in a helicopter crash.

Bartonicek will stay on as a member of a new advisory board, where he will be joined by Czech billionaire Daniel Kretinsky, who used to often co-invest with Kellner, and who is also the partner of his daughter Anna, a Czech Olympian show jumper.

The recruitment of Smejc and Kretinsky shows that Renata Kellnerova – who is worth $16.2bn, according to Forbes – recognised that PPF needed to strengthen its management, particularly following Russia’s invasion of Ukraine, which has damaged its investments there. It could also herald a resurgence of dealmaking by the financial group, as it tries to wind down its investments in Russia and Asia.

The relationship between Smejc and Kretinsky will now be the key one to watch for the future of the group. Kretinsky is rumoured to have his eyes on some of PPF’s assets or even said to want to take over the holding itself. Bringing in Smejc into the top PPF job will therefore be seen as a way of balancing the influence of Kretinsky, who has become the leading Czech tycoon since Kellner's death.

The loss of the arch-dealmaker Kellner – before his death the richest man in Central Europe – has been a body blow to the group, prompting speculation that it would eventually be broken up. PPF has assets of €40bn, mainly in finance, telecoms and the media, spread across Central Europe, Russia, China and the Far East.

PPF had reportedly been in talks to sell its Home Credit operations in Russia and Kazakhstan before the invasion but it dragged its heels and the value of any transaction is now likely to be much reduced. PPF said on February 28 that its Russian net assets were at that time valued at around €1bn, some 10% of its total net assets. The group has subsequently disposed of all of its Russian  residential real estate, and is in the process of selling its agricultural businesses in Russia, according to Russian media.

There is also speculation that PPF is targeting disposals of Home Credit’s Asian operations in India, Vietnam, Indonesia and the Philippines. Bloomberg has reported that those assets could be worth up to $2.5bn. Some observers believe China could also eventually be put up for sale, given Home Credit's financing problems there following the Communist regime's liquidity squeeze to cool the economy down.

PPF’s disposals partly reflect Home Credit’s struggles in China and India, caused by provisioning for payment holidays during the coronavirus (COVID-19) pandemic. PPF made its first ever loss in 2020 of €291mn because of impairments at Home Credit. By refocusing on more developed markets, PPF can diversify its portfolio and stabilise its returns.

Smejc has the advantage of being a proven dealmaker in his own right, with a personal wealth estimated at CZK20bn, as well as being someone who knows the PPF group intimately, particularly its Russian operations.

"From 2005 to 2012, [Jiri Smejc] played a key role at PPF, often discussing the group's business activities with Petr in great detail. He understood Petr's way of thinking," Kellnerova said in a statement. "I wish him much success in building on Petr's legacy and further developing PPF."

Smejc and Kellner first co-operated as shareholders of Czech broadcaster TV Nova, which they sold back to its original US owners CME for $1bn in 2005.

As part of that deal, Smejc then became a 5% shareholder in PPF and head of Home Credit Russia and then of all PPF’s operation in Russia, transforming the group into one of the biggest foreign private investors there. In 2012 he became CEO of the whole Home Credit group – parlaying his PPF stake into an 8.88% stake in the consumer loans company – and since 2018 chairman.

Smec’s private vehicle Emma Capital controls the top Croatian sport betting agency SuperSport, which he acquired when he sold out of Czech gambling company Sazka in 2019. Emma Capital also has investments in energy in Southeast Europe, as well as in e-commerce companies.

Following his appointment as PPF chief executive, Smejc will receive stock options for up to 10% of PPF shares in place of a salary. Under an existing agreement he already has the right to buy a 2.5% stake in Home Credit at its nominal value if an internal rate of return target is met by the end of 2023.

Smejc said: “Professionally, this is the top assignment any entrepreneur in the Czech Republic could wish for. PPF is the one and only, and I will do my absolute best to continue strengthening PPF’s unique position.”