It reached an agreement to purchase 183,386 shares for €180.1 ($201.24) each, but the deal must first be cleared by competition authorities.
Podravka acquired the shares from a sellers’ consortium that included Slovenski Drzavni Holding, a public limited company entirely owned by Republic of Slovenia, pension fund Modra Zavarovalnica, asset management companies KD Kapital and KD Skladi, insurance company Adriatic Slovenica and investment fund NLB Skladi.
Slovenian law requires that Podravka publish a takeover bid for the remaining outstanding stock. The deal values the entire company at €64m ($71.5m) but the actual price will be lower since Zito has treasury shares worth about a tenth of the entire issue.
“We've achieved the maximum price possible and exceeded expectations,” SSH chair Matej Pirc told the press as the deal was announced. He said Zito would get a strategic investor from the industry and “a clear development vision”. The sale was led and coordinated by SDH, together with KD Skladi, and with assistance from financial advisors Erste Group Bank and P&S Capital and legal advisor Jadek & Pensa, announced SDH.
“With this proposed acquisition, Podravka will consolidate its position and become a regional leader in several additional product categories, which further improves [our] company’s market position,” said Podravka in a release. The total consolidated annual revenue of Podravka Group will amount to HRK4.5bn ($665.35m) following the Zito takeover.
“Acquiring Zito we create a new leader in food industry in the market of Slovenia, with significant growth potential on numerous markets in which Podravka is present. This is a significant step forward in internationalization of our business, where market of Slovenia becomes one of Podravka’s most significant markets,” saidZvonimir Mrsic, Podravka’s CEO.
Zito trails Mars by 0.5%
Zito has a wide portfolio of brands holding leading or one of the top five positions in the Slovenian market, such as Gorenjka (chocolate), Sumi (candies), the umbrella brand Zito (flour and bakery products) and Zlato Polje (rice, pasta, mill products), among others.
Last year Zito controlled a 5.10% stake in Slovenia’s chocolate confectionery market, trailing only multinational heavyweights such as Mondelēz International (25.80%), Ferrero Group (17.30%) and Mars Inc. (5.60%), according to Euromonitor International. “With the exception of the biggest two manufacturers that combined are set to control 43% value share in 2014, chocolate confectionery is a very fragmented category in Slovenia with plenty of manufacturers present,” explains Euromonitor.
Zito’s Gorenjka brand of chocolate confectionery includes milk chocolate, dark chocolate, rice chocolate, dark cooking chocolate and chocolate industrial cake products. The company also produces Sumi jelly candy and Herba hard mint candy products.
Potential for growth in niche chocolate products
The retail value of the Slovenian chocolate confectionery market is expected to reach $152.2m this year, up by 1.47% from $150m in 2014, based on Euromonitor’s forecast. The organization expects the value of the country’s biscuit market will grow steadily to $167.5m in 2019, based on a compound annual growth rate (CAGR) of 2.4%.
Euromonitor says chocolate confectionery in Slovenia was hit by the poor economic situation that led consumers to seek out cheaper private label alternatives.
In terms of volume, the Slovenian chocolate confectionery industry is expected to manufacture 7,400 tonnes in 2015, up by 1.4% from 2014. The 2015 output will mostly consist of tablets (3,200 MT), boxed assortments (2,000 MT) and countlines (1,400 MT). Euromonitor expects that the market’s output will reach 7,900 tonnes by 2019.
The organization says low sugar, high fiber and higher protein content could be trends to follow in the Slovenian chocolate market as well as organic and functional chocolate.