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Fish Trader Becomes First IPO in Bosnia

Weathering crisis and low investor interest, frozen fish trading company Fratello became the first company ever to pull off an IPO in Bosnia and Herzegovina (BiH). In fact, of all the former Yugoslav countries, only Croatia and Slovenia had seen public offerings by private firms up to that date. Fratello was looking for cash to finance its ambitious growth plans, which envision revenues to grow from EUR 5.6 million last year to more than twice that amount in 2013. "We started preparations for the IPO in January 2007" says Dr. Alfred Matzka, Partner of the Austrian venture capital firm Horizonte, which still owns 27.5 percent of Fratello. "By the time the crisis hit the region, we had reached a stage where we did not want to put off the transaction anymore."

Proceeds from the IPO were roughly BAM 860,000 (approx. EUR 442,000). That was at the low end of expectations. Initially, there had been hopes to make us much as BAM 1.5 million, but lack of interest thwarted the plans,

Finding investors proved particularly challenging. Investment funds have by and large withdrawn from the Balkans ever since the onset of the crisis, and private investors are virtually non-existent. So Fratello found a different – and innovative — solution. “Most of the new shares went to Fratello suppliers and service providers such as Greek and Spanish logistics companies,” says Matzka. This helped eliminate some of the information asymmetries that arise because most companies in BiH are small and lack efficient reporting procedures. It had also opened up the door to a later sale of Horizionte’s stake to the new shareholders, says Matzka. This might happen as soon as next year, when the lock-up period ends, confirms Branko Kecman, Director of local brokerage firm Advantis Broker, which paved the way for Fratello on the Banja Luka Stock Exchange.

Support by the government of the Repulika Srpska, one of the two so-called entities of BiH, and the local branch of the World Banks financing institution, the International Finance Corporation (IFC) was also crucial. While the IFC covered some of the advisory expenses, the Republika Srpska acquired a six-percent stake in the company.

The innovative move was possible because Fratello owner and CEO Mario Derajic took Austrian venture capital firm Horizonte on board in 2002 when capital needs compelled him to look for new financing sources. They introduced higher transparency and lifted corporate governance.