How the Croatian Government Pressured Allianz Over Sberbank Deal
Allianz’s Croatian pension fund, AZ, which is 51% controlled by Allianz Group, withdrew from a deal involving a 500 million euro payment to Russia’s Sberbank. The Russian bank sought a buyer for its 42.5% stake in Croatia’s largest employer, Fortenova, a food retailer and manufacturer. The Croatian government lobbied Allianz and warned it of regulatory action, but Allianz declined. Croatia’s financial watchdog, Hanfa, launched a regular audit of decision-making, controls, and cyber risk management of AZ. Sanctions on Russia made the deal complicated, and Fortenova’s re-financing of 1 billion euro debt more problematic.
The complications over Allianz and Sberbank’s deal over Croatia’s Fortenova have deep-seated roots that reveal wider power dynamics in the region, the article notes. The additional piece delves into the background of the issue, including the geopolitics behind Russian enterprises in Croatia, Croatia’s relationship with Germany, and the European Union’s regulations on Russian companies.
Russian Influence in Croatia
Sberbank’s 42.5% stake in Fortenova is the largest shareholdings among the company’s investors. As such, it is a significant strategic asset that many see as having political implications for the region. While Croatia is smaller than Russia, it is geographically connected to Europe, while Russia longs to exert its influence over Western Europe. Besides, Croatia is an attractive place to invest since it has a relatively stable economy and geographical centrality in the Balkans.
The Croatian Government’s Role in the Deal
Allianz’s Croatian pension fund AZ was a significant investor in the failed deal. The Croatian Government has an equal stake in the company, which makes the deal’s collapse a complicated issue for the government’s economic interests. One reason why the deal fell through was due to concerns that it would violate EU sanctions against Russia and cause reputational damage to its investors like Allianz. As such, the government was keen to push the deal forward and was willing to go to great lengths.
Croatia-Germany Relations
Allianz is a German company, which has a significant footprint in the Croatian market. However, relations between the two countries have been strained, with both nations having specific cultural and economic reservations. For instance, Germany has been critical of Croatia’s handling of the migrant crisis, while Croatia has been at loggerheads with Germany over European Union policies affecting the publication of EU documents in minority languages.
EU Regulations on Russian Companies
The EU has often been critical of Russian companies’ involvement in Europe, especially after Russia’s annexation of Crimea and its military incursions into Ukraine. Sanctions have been applied to prevent such companies from participating in European markets. In the case of Fortenova, such sanctions have made the company’s refinancing of its 1 billion euro debt more challenging than it would otherwise have been.
Summary
The Croatian government pushed Allianz to reconsider a deal involving Russia’s Sberbank, which sought a buyer for its 42.5% stake in Fortenova, Croatia’s largest employer. The deal collapsed after Allianz’s Croatian pension fund AZ withdrew, fearing it would breach EU sanctions on Russia. The Croatian government lobbied Allianz and warned it of regulatory action, while Croatia’s financial watchdog, Hanfa, launched an audit, citing regular controls of decision-making, controls, and cyber risk management of AZ. Sanctions on Russia have made the refinancing of Fortenova’s 1 billion euro debt more problematic.
The Future of Russia’s Influence
Russia’s ambitions to exert influence over Western Europe have long been a concern for many nations. Its involvement in Croatia, coupled with the geopolitical significance of the Balkans, has made its investments a cause for concern. While the EU has regulations around Russian companies, the situation in Fortenova shows how the dynamics of power can override such regulations. The fallout from this could affect relations between Croatia and Germany, which will have significant implications for the region’s stability.
Keywords: Russia, Allianz, Fortenova, Croatia, EU, Sberbank, Sanctions, Hanfa, Audit, Germany
Sources:
1. “Croatia lobbied Allianz over Sberbank deal” from ft.com
2. “The Geopolitics of Sberbank in Croatia and beyond” from theconversation.com
3. “What the EU’s sanctions against Russia mean for Europe” from cnbc.com
—————————————————-
| Article | Link |
|---|---|
| UK Artful Impressions | Premiere Etsy Store |
| Sponsored Content | View |
| 90’s Rock Band Review | View |
| Ted Lasso’s MacBook Guide | View |
| Nature’s Secret to More Energy | View |
| Ancient Recipe for Weight Loss | View |
| MacBook Air i3 vs i5 | View |
| You Need a VPN in 2023 – Liberty Shield | View |
The Croatian government lobbied insurer Allianz and threatened it with regulatory action after a local pension fund it controls withdrew from a deal involving a 500 million euro payment to Kremlin-controlled Sberbank.
The Russian bank has been trying to find a buyer for its 42.5% stake in Fortenova, a food retailer and manufacturer that is Croatia’s largest employer, with 45,000 employees and €5.2 billion in sales. and a key food supplier throughout the region.
The government’s preferred option last fall was for Sberbank sell to a group of Croatian pension funds, the largest of which was AZ, a fund 51% owned by Allianz. The Italian UniCredit holds a minority stake.
The deal, which valued Sberbank’s stake in Fortenova at €500m, collapsed when AZ withdrew last October after Allianz decided not to accept the deal over fears it could breach state sanctions. EU, people familiar with the details told the Financial Times.
Allianz told the FT that AZ’s supervisory board “made the independent decision not to pursue the Fortenova investment case because its risk and return profile was wholly unsuitable for retirees and because its financial structure presented potential compliance risks that it considered unacceptable.”
Croatian foreign minister Gordan Grlić-Radman and the country’s German ambassador Gordan Bakota subsequently lobbied various Allianz executives, according to the people.
Grlić-Radman urged Allianz Klaus board member Peter Röhler to reverse the decision, arguing Fortenova was crucial to the wider Croatian economy.
The Croatian Foreign Ministry in Zagreb did not respond to FT requests for comment. The country’s embassy in Berlin declined to comment.
When Allianz refused to reconsider, Croatia’s financial watchdog Hanfa issued what one of the people called “explicit threats” against the German firm’s local business in November.
Hanfa said if governance and risk management controls were found to be faulty, it could result in a fine and replacement of local management, the people said.
Weeks later, the regulator launched a site inspection of AZ, saying it was a regular audit of decision-making, controls and cyber risk management, the people added.
When asked about those events, Hanfa declined to comment in detail, telling the FT that his “examination of the Allianz pension company is still ongoing” and adding “we will inform the public of the results of the examination after it is finished.”
Sberbank is Fortenova’s largest shareholder, but sanctions have large-scale repercussions from Russia invasion of Ukraine last year made this structure problematic and the refinancing of the group’s 1 billion euro debt more complicated and onerous.
The German government has been notified of the pressure being placed on Allianz by the Croatian government and Hanfa, the people said. A German government spokesman told the FT that he would not “comment on internal business decisions [or] on the content of confidential discussions with representatives of other countries”.
Allianz said it would not comment “on interactions with government authorities” but added that it has made “decisions based on their merits, in line with the company’s values and duties to its customers.”
Fortenova’s chief executive, Fabris Peruško, declined to comment on the Croatian government’s actions, but said: “The situation we’re in today is due to the agreement we didn’t execute in October,” he said. “Had we done that, we would be refinanced today and would be focusing solely on our business.”
The big concern for Allianz, according to people familiar with the company’s views, was that while the transaction was designed to comply with the letter of the EU sanctions, it would violate them in spirit because it involved a payment to a company controlled by the Kremlin.
Allianz was also put off by Fortenova’s financial results, the people said. The company was restructured in 2017-2019 after its predecessor, Agrokor, racked up losses and defaulted on over €1 billion in loans. Fortenova has since become profitable again and its revenues are stable.
Sberbank was a major creditor of Agrokor and became the largest shareholder of Fortenova in a debt-to-equity swap that was part of Agrokor’s restructuring process.
https://www.ft.com/content/8b85cbc8-bf1a-49a2-a877-2a2ba3efdd08
—————————————————-