Bulgarian insurance and asset management group Eurohold Holding said on June 20 that it has agreed to buy the Bulgarian assets of Czech utility company CEZ for 335 million euro.
Eurohold said that it would finance the deal using its own funds and loans from “two global investment banks with extensive experience in securing financing for similar deals.”
Czech state-owned utility CEZ said in February 2018 that its board approved the sale of the group’s assets in Bulgaria, which include the electricity distribution company that services the western part of the country and the capital city of Sofia.
CEZ planned to sell all its assets in Bulgaria, structured in seven companies – CEZ Bulgaria, which manages the group’s operations in the country; grid operator CEZ Razpredelenie; electricity distribution unit CEZ Elektro Bulgaria; electricity trader CEZ Trade Bulgaria; communications and technology subsidiary CEZ ICT Bulgaria; renewable energy producers Free Energy Project Oreshetz (solar) and Bara Group (biomass).
Media reports had claimed for years that CEZ, which bought three regional power distribution companies in western Bulgaria for 281.5 million euro in 2004, was looking to exit the country, having accused Bulgarian authorities of creating an unfavourable regulatory environment and lodging an international arbitration lawsuit in 2016.
But it was its chosen buyer, Bulgarian firm Inercom, that raised the loudest objections among Bulgaria’s politicians, given the company’s small scale – it owned three solar parks in the country – and questions about how it plans to cover the acquisition price. Some opposition MPs went as far as to claim that the company was a stand-in for other, unknown interested parties.
In the end, the deal fell through in June 2018 when Bulgaria’s Commission for Protection of Competition denied its approval, arguing that it would lead to “establishing or strengthening the dominant position of the merged group.” After Inercom sold its solar parks and applied for approval again, CPC declined another review, saying that its first ruling was still being appealed.
With the deal bogged down in courts, CEZ began talks with other prospective buyers in December 2018 and entered into exclusive negotiations with Eurohold in April.
Given the numerous twists and turns in the saga so far – at one point, the Cabinet said it would take a “controlling stake” in Inercom, only to reconsider later – Eurohold did not give a timeline for closing the deal, saying only that it would seek the required regulatory approvals.
But the company also appeared to be laying the groundwork to head off any criticism about its lack of experience in the utilities sector, saying that it secured the agreement of senior CEZ executives to stay on in order to “guarantee a smooth transitional period in management.”
Eurohold also said that it set up a consultative council of “experts with solid international experience in the electricity distribution business”, which would advise it on integrating the CEZ companies into its holding structure.
Eurohold is best known for its insurance unit, Euroins, and its car sales and leasing business. It said that it recorded an operational profit of 52.3 million leva (about 26.7 million euro) in 2018 and consolidated revenue of 1.3 billion leva, with 1.4 billion leva in assets under management.
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