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News 21 Aug 17

EBRD Welcomes Serbian Move to Privatise Galenika

Following restructuring in Galenika, the European Bank for Reconstruction and Development, EBRD, says its ready to consider supporting new investors to revive the pharmaceutical company.

Akin Nazli
BIRN
Belgrade
EBRD's headquarters in London. Photo: EBRD

Daniel Berg, Director for Serbia at the European Bank for Reconstruction and Development, EBRD, told BIRN that the Serbian government decision to swap the company’s debts for equity would seem to have cleared one concern that investors may have about investing in a company with excessive financial liabilities.

EBRD will welcome private ownership and would be interested in exploring the financing opportunities once a decision is made about privatisation, Berg said.

“EBRD does have experience working in the pharma sector, both with domestic and international partners, and we would bring our knowledge and experiences to support a new investor,” Berg said.

“We look forward to the next steps in the privatisation process and remain ready to consider financing for new investors as a financial and operational structure is being put in place,” Berg added.

On August 14, Zoran Pantelic, head of the trade union at Galenika, told the Serbian news agency Tajug that the government and the state-owned company Srbijagas had taken over 14.7 billion dinars (€123 million) worth of company liabilities in exchange for an 8 per cent stake, in a move to prepare the way for another privatisation attempt.

Galenika is among the largest loss-making state-owned enterprises in Serbia whose privatisation the IMF has encouraged under a stand-by agreement with the Serbian government. Previous efforts to privatise the company failed due to the huge debts and disagreements with trade unions.

Following the debt for equity swap, the government owns approximately 93 per cent of the company. The remaining 7 per cent is owned by employees' unions.

Galenika still owes 71  million euros to the banks and has 120 million euros worth of receivables from retailers, Pantelic announced.

The company’s workforce has already been cut to 1,400 from 2,800 a few years ago. However, previous bidders were said to have demanded a further cut in the workforce to between 700 and 900 employees.

The government is working on a new scheme to strike a deal with the unions and it is expected to announce a new tender in September, according to local media.

EBRD believes that new investment into Galenika is needed and in the best interest of the company, its workers and the overall economy, according to Berg.

“We would hope that privatisation including involvement of a high-quality strategic investor is most likely to lead to a new strategy for the company and the possible revival of Galenika's fortunes,” Berg concluded.

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