ZAGREB (Croatia), June 5 (SeeNews) – Croatian diversified conglomerate Adris Grupa [ZSE:ADRS-P-A] could use the funds from the sale of its tobacco arm Tvornica Duhana Rovinj (TDR) for acquisitions that could help it break into new industries or boost its insurance sector footprint, a financial analyst at Raiffeisenbank Austria said.
Earlier this month, Adris signed a deal to sell TDR to British American Tobacco for 505 million euro ($569.1 million) after the deduction of TDR's liabilities.
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Adris Grupa also spans tourism, fish farming and insurance.
The company's investment strategy so far was to acquire companies that have growth potential or are complementing well its existing operations, then to thoroughly restructure them in order to reach the expected level of profitability and to position them as a leader in their respective market segment, Nada Harambasic-Nereau said in an emailed response to a SeeNews inquiry.
“So we can say that Adris does not shy away from entering into a whole new industry as it recently did with its entry into the insurance business,” Harambasic-Nereau said.
In September, Adris Grupa said it aims to be the regional leader in all fields of its operation, including the insurance market which it entered earlier that year with the completion of the acquisition of a minority stake in local insurer Croatia Osiguranje.
It seems most likely that the funds gathered from the sale of TDR will not be used for the payment of extraordinary dividend as in a recent invitation to the shareholders assembly Adris Grupa said it plans to use the funds to finance further growth and development of its activities, which indicates that future acquisitions to back growth are highly likely, Harambasic-Nereau said.
Adris Grupa’s investment record and its determination to expand its footprint on the insurance market indicates that possible acquisition targets could come from the insurance business but also from any other industry.
The company’s expansion outside the region seems a highly unlikely move, except when it comes to its fish farming business, in which Adris Grupa plans to expand on the wider European market, Harambasic-Nereau said.
ADRIS HAS ENOUGH OWN FUNDS TO ACQUIRE SLOVENIA’S TRIGLAV
As of the end of March, Adris Grupa had around 290 million euro in cash and short-term financial assets, Harambasic-Nereau said.
With the sale of TDR and the payment of dividend, it could be left with around 772 million euro of own funds and having in mind it is not overstretched with bank loans, having a total of 57 million euro in total loans, it could also reach out to banks to help finance further acquisitions if needed, Harambasic-Nereau said.
As of the market close on Thursday, the total market capitalization of Ljubljana-listed insurer Triglav [LJE:ZVTG] was 663 million euro.
“The market capitalization of Slovenian insurer Sava Re [LJE:POSR] - another of the possible acquisition targets - stands at 275 million euro, without the stake in the insurer that Adris Grupa already owns,” Harambasic-Nereau said.
“This means that Adris Grupa could finance the takeover of Triglav with its own funds. Through recapitalization or new borrowing, it could take over Sava Re as well.”
Adris Grupa's net profit fell 8.9% to 351.3 million kuna ($52.4 million/46.5 million euro) last year while its total revenues jumped to 5.5 billion kuna from 3.2 billion kuna on the back of the Croatia Osiguranje acquisition.
Triglav's consolidated net profit rose 23% to 85.7 million euro in 2014, while its consolidated net premium income fell 2% to 819.8 million euro.
Sava Re's consolidated net profit nearly doubled to 30.5 million euro in 2014 on 21% higher consolidated gross premium written of 468.2 million euro.
(1 euro=7.56 Croatian kuna)