* Slovenia finally opens up to foreign capital
* Trying to raise cash after saving banks
* Political tensions still unnerving markets
* For sale: Telekom, airline, airport, bank...
By Almir Demirovic and Zoran Radosavljevic
LJUBLJANA/ZAGREB, Jan 29 The gloves came off as
Joseph A. Mussomeli neared the end of his tenure as Washington's
envoy to Slovenia, a posting that coincided with the country's
narrow escape from submission to an international bailout.
An American firm was in the running to buy Slovenia's
Fotona, a state-owned developer of medical and military laser
gear with big sales in the United States. It was a rare example
of this ex-communist country, now proud of its euro zone
membership, selling a treasured corporate possession.
"Everything was agreed," Mussomeli told the Slovenian daily
Finance in December, a month before he left the country.
"Then, despite assurances from senior government circles,
PDP (the state fund with a majority stake in Fotona) suddenly
came forward and demanded the price go up by one million euros
"It's not so much about the money," he said, "it's just
another example that puts Slovenia in a bad light abroad."
More than two years after it was first put up for sale,
Fotona is first in line this week for privatisation by a state
used to controlling 50 percent of the economy.
The American company, Technology4Medicine, is still in the
running, alongside private equity fund Alpe-Adria-Balkan Fund.
Slovenian media reports have disputed Mussomeli's
characterisation of the state fund's tactics. Either way, the
country long expected to be the economic success story of the
ex-Yugoslav republics has a dismal record on privatisation.
Having scraped together funds to bail out its banks last
month, Slovenia must now sell assets once considered sacrosanct
by 2 million Slovenians who, unlike the rest of Eastern Europe,
resisted Western capital after the end of the Cold War.
The risk is that big companies go at knock-down prices to
buyers keenly aware that Slovenia needs the cash urgently.
Some in the disparate coalition government are openly
hostile to selling off healthy household names, regardless of
the banking troubles blamed on politically-motivated lending.
"Privatisation is key to breaking the vicious circle of
state-owned enterprises, state-owned banks and interests of
political elites," said Otila Dhand of Teneo Intelligence, a
Final bids for Fotona are due on Thursday.
More than a dozen other companies are on the block,
including Telekom, the biggest telecom group, Ljubljana airport,
flag carrier Adria Airways and No. 2 bank NKBM.
Two recessions since 2009 have exposed corruption and crony
capitalism. As the global crisis ravaged Slovenia's exports, bad
loans at state banks soared to around 25 percent of national
"The arrival of foreigners is becoming a reality which we
long refused to face up to," said Lidija Jerkic, head of
Slovenia's national union of metal workers. "Given the dearth of
cash and the state of our economy ... it's one of the last
remaining options if we want to preserve it."
Prime Minister Alenka Bratusek told Reuters this week that
the main state investment fund, SOD, "has informed us of a
detailed timetable for the sale of 14 companies, which we have
not made public yet."
Analysts, however, are doubtful. The Social Democrats, the
second biggest party in the four-way ruling alliance, have
openly opposed privatisation in the past.
"Our stand is that the strategy must determine which firms
are of strategic interest, in which the state should keep a
small controlling stake, and which should be sold off entirely,"
party leader Igor Luksic told Reuters last week in an emailed
Former finance minister France Krizanic, a senior party ally
of Luksic, was more direct: "We're not talking about a float on
the stock exchange but a sale to likely direct competitors. With
that, the national economy loses jobs and free cash flow."
After coalition talks on Monday, the Social Democrats
appeared to support the sale of Telekom and Ljubljana airport,
but said they had regrets. The agreement to sell "was not
thought through," a party statement said.
"RULES OF THE GAME"
Such remarks will unnerve markets still uncertain whether
Bratusek can hold the government together now that it has staved
off the immediate threat of a bailout.
Telekom represents the biggest prize. The government is
trying to attract interest from Deutsche Telekom and
Telenor. It has hired Citi to organise the sale of a
roughly 75 percent stake.
As for bank NKBM, recapitalised and now fully owned by the
state, Slovenian media say Hungary's OTP and the European Bank
for Reconstruction and Development (EBRD) may be interested.
"We will look positively at investments in the banking
sector as well as in corporates, but we need a clearer sense of
the rules of the game," EBRD chief economist Eric Bergloff told
Another milestone could be the sale of leading local
retailer Mercator to Croatian rival Agrokor.
Negotiations have dragged on since 2011. "It will be resolved
one way or another by the end of this week," a source close to
Agrokor told Reuters.
Then there are the unions, up in arms after layoffs followed
the October sale of the first company on the privatisation list,
paint and varnish producer Helios.
"Unions will never agree to the formula 'more
privatisations, fewer workers'," Slovenia's Association of
Independent Unions wrote in an open letter to Bratusek last
As the sale of Fotona neared, however, union leaders
appeared more resigned. "The buyer will probably be a foreigner.
We can only hope they preserve the company in its current form,"
said Fotona union representative Bruno Reja.
"We do expect drastic changes, however, as happened with
other companies sold to foreigners, like layoffs or closing of
whole departments," he said. "Foreigners only focus on profit.