Croatian government pressures Allianz over €500 million Sberbank deal

The Croatian government has put pressure on insurer Allianz and threatened it with regulatory action after a local pension fund found to be out of control linked to a €500 million payment to Kremlin-controlled Sberbank.

The Russian bank is trying to find a buyer for its 42.5 percent stake in Fortenova, a retailer and food producer that is Croatia’s biggest employer, with 45,000 employees and €5.2bn in sales, and the entire region. is a major food supplier.

Last autumn the government’s preferred option was for Sberbank to sell a group of Croatian pension funds, the largest of which was AZ, a fund 51 percent owned by Allianz. Italy’s Unicredit owns a minority stake.

The transaction, which valued Sberbank’s stake in Fortenova at €500mn, AZ went through last October after Allianz decided against the deal because of concerns it could violate EU sanctions, 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 pensioners, and because its financial structure presented potential compliance risks”. who considered it unacceptable”.

Various Allianz officials were subsequently lobbied by Croatia’s foreign minister, Gordon Grlic-Redman, and the country’s German ambassador, Gordon Bakota, according to the people.

Grlic-Redman urged Allianz board member Klaus Peter Röhler to rescind the decision, arguing that Fortenova was vital 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 “clear threats” against the German company’s local business in November.

The people said Hanfa insisted that if governance and risk management controls were found to be flawed, it could result in fines and the replacement of local management.

Weeks later, the regulator began an on-site inspection of AZ, the people said, saying it was a routine audit of its decision-making processes, controls and handling of cyber risks.

Asked about those developments, Hanfa declined to comment in detail, telling the FT that “the examination of pensions company Allianz is still ongoing” and that “we will let the public know once the results of the examination are complete”. Will inform”.

Sberbank is Fortenova’s biggest shareholder, but sanctions from Russia’s full-scale invasion of Ukraine last year have made this structure problematic and refinancing the group’s €1 billion in debt more complicated and costly.

The people said the German government has been briefed about the pressure exerted by the Croatian government and HANFA on Allianz. A German government spokesman told the FT it would not comment on “internal entrepreneurial decisions (or) the content of confidential discussions with representatives of other countries”.

Allianz said it would not comment “on conversations with government officials”, but added that it makes decisions “based on their merits, in line with company values ​​and duties to its customers”.

Fortenova chief executive Fabrice Perusko declined to comment on the Croatian government’s actions, but said: “The situation we are in today is because of the deal we did not execute in October,” he said. “If we had, we would refinance today and focus exclusively on our business.”

The major concern for Allianz, according to people with knowledge of the company’s approach, was that while the transaction was designed to comply with the letter of EU sanctions, it violated them in spirit because it Payments to a Kremlin-controlled business were involved.

The people said Allianz was also removed from Fortenova’s financial records. The company was restructured in 2017-2019 after its predecessor, Agrocor, had piled up losses and defaulted on loans of more than one billion euros. Fortenova is profitable again and its revenue is stable.

Sberbank was a major creditor to Agrokor and became Fortenova’s largest shareholder in a debt-to-equity swap that was part of the Agrokor restructuring process.