Orbico Group Financing

Country:

Croatia

Project number:

48071

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

13 Jan 2016

Status:

Repaying

PSD disclosed:

10 Mar 2017

Project Description

A long term loan of up to EUR 20 million to Orbico d.o.o. ("Orbico", the "Company"), a company incorporated in Croatia and owned by Mr Branko Roglic. Zagrebacka banka d.d. will provide additional EUR 20 million under pari passu terms with the Bank.

Project Objectives

The loan proceeds will be used to support the Company in (i) cross border expansion via acquisition of the Polish distributor Distribev Holding sp zoo, owned by the Heineken group in the amount of up to EUR 30 million, (ii) capital investment in the logistics in Bulgaria in the amount of up to EUR 2 million and (iii) balance sheet restructuring in Slovenia in the amount of up to EUR 8 million.

Transition Impact

The project is expected to provide transition impact through the following:

(i) Backward linkages to producers in the Balkan region & skills transfer: By supporting the Company's geographical expansion the Bank will enable the Company to expand its exports programme. Promoting backwards linkages will enable regional producers (specifically in Bosnia and Herzegovina, Croatia, Macedonia and Slovenia), largely SMEs, to reach the foreign export markets

(ii) Demonstration of successful restructuring:The CEE distribution sector is very fragmented, characterised by a large number of market participants that offer limited services. By supporting Orbico's restructuring and consolidation strategy, the Project will indicate a route for the development of the distribution sector with special emphasis on costs rationalisation and introduction of innovative activities. In addition, the Company is currently developing two pilot projects, which would showcase new approaches to distribution not present in Europe but also in a pilot phase in the US : (i) Digital B2B interactive ordering platform and (ii) Digital guerrilla B2C channel.

Client Information

ORBICO DOO

Orbico d.o.o. is the leading distributor of FMCG in Croatia and a holding company of Orbico Group (the "Group"), the largest FMCG distributor in Central Europe with operations in 18 CEE countries where it co-operates with more than 60 suppliers and distributes more than 200 brands to 40,000
customers.

EBRD Finance Summary

EUR 20,000,000.00

Total Project Cost

EUR 43,000,000.00

Environmental and Social Summary

Categorised B: The environmental and social impacts associated with the distribution of beer and other beverages are readily identified and can be mitigated through the application of standard mitigation measures. Environmental and Social Due Diligence included a review of the current management systems addressing environmental and social risks at the corporate level in the Borrower's organisation, Orbico, and their Polish subsidiary Navo; and an independent audit of Target Company's, Distribev, operations and environmental and social performance against the EBRD PRs. Tranche 2 is uncommitted and will require review of the Capex programme to complete the ESDD.

The Borrower has implemented robust internal systems for HR and labour issues management, including regular reporting, sharing of best practices across the group, and training programmes for sales representatives. The Group employs over 3,100 staff (circa 60 male/40% female) and operates in 17 countries. Distribev employs circa 1100 employees (77% male/23%female), of which 49% belong to trade unions and are covered by a Collective Agreement established originally with Heineken, and which will be upheld for 12 months following divestment from the Group.

Distribev still utilises many HR policies and procedures of Heineken, including their recruitment and grievance mechanisms. This will be addressed under ESAP. No retrenchment is planned at the moment following the acquisition, but should it occur in the future PR2 compliance is required. The ESDD concluded that the Borrower has the relevant capacity to implement the project in line with EBRD PRs, however requires strengthening of its internal environmental and social management systems. The Target operates reportedly in line with the Polish environmental and social legal requirements, but needs to align its policies with those of the Borrower after the acquisition and improve some of its practices related to H&S. A number of policies and resources are required to bring the Project into compliance with the EBRD PRs. The ESAP is being developed and will be agreed with the Borrower prior to the Board. The ESAP will include inter alia: requirements for a systematic approach to environmental and H&S management across the group, improvements to H&S practices related to movement of forklifts at warehouses, requirements to monitor transportation contractors road safety performance, requirement to adopt Orbico HR policies and systems at Target Company, development of template retrenchment plan in line with PR2 requirements in case of any future retrenchment, and development of corporate stakeholder engagement plan. EBRD will also provide technical support to the client to improve its HR policies and practices in the area of Equal Opportunities. ESD will monitor the project through review of annual environmental and social reports and monitoring visits as required.

Technical Cooperation

None.

Company Contact Information

Romina Oreskovic
romina.oreskovic@orbico.com
+385 1 3444 800
www.orbico.hr
Orbico d.o.o. Koturaska 69 10000 Zagreb

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