Destruction of Serbian pharmaceutical industry – Hemofarm’s case

Despite the fact that the Serbian pharmaceutical giant, Hemofarm from Vrsac was sold to Germany’s Stada in 2006 for a record 475 million euro, which makes this privatization the most successful in the Serbian pharmaceutical industry, this transaction is still rife with many unknowns.

The biggest unknown is the one that relates to the state’s role in the privatization which, in 2002, sold its 19% share for only 9.13 euro per share to the Dutch investment fund Aktiva Sei BV, which then resold it to Germany for 147 euro per share. What situation or circumstances led to this fund acquiring a share in Hemofarm at such a privileged price?

Experts argue that these circumstances are probably closely related to the agreement that Miodrag Babic, the then CEO of Hemofarm and the consultants from Deloitte&Touche, made, and that is to show unrealistic picture of the company’s operations, i.e. to report an unrealistic profit and inflating the price of Hemofarm’s assets, as well as its revenues. It was Deloitte&Touche that carried out the evaluation with the end goal of the company’s top management, who had been buying the company’s shares from external shareholders for a very low price (sometimes even only 450 dinars per share) to, in the end, sell these shares at a much higher prices.

If it is proven that this was done deliberately, then Deloitte&Touche portrayed the company’s financial results in an unrealistic light. Also, it is a highly unlikely coincidence that the head of the Serbian office of Deloitte&Touche, Darko Djunic was, at the time, a member of Hemofarm’s Managing Board.

Some of these irregularities were discovered by the new German owners, especially those relating to fictitious increase in revenue, which was also the reason why Babic left the company. The information that was not fabricated was the figure of 53.36 million euro which is how much the top management received after selling their 11% stake in the company, out of a total of 35% which was owned by small shareholders. It was the company’s CEO, Miodrag Babic who benefitted the most from the sale of Hemofarm, pocketing 9.5 million euro for himself.

Some of Babic’s former associates claim that he earned 50 million euro from the sale of his stake, but that part of the money ended up in this bank accounts abroad.

“On paper, he received 9.5 million euro for his shares, but everyone knows that he also got 40 million euro from the Slovenian tycoon Darko Horvat, who was the majority owner of the Dutch investment fund Aktiva Sei BV. Babic rooted for the Slovenian to buy a state’s stake in the company for 9.13 euro per share. Also, many small shareholders claim that they were selling their shares to this fund at the price of 1,000 dinars per share after being talked into doing so by Babic”, explains a former Babic’s associate.

This source says that everything can be proven, black on white.

“I know that Aktiva Sei BV paid the money, on the account of the so-called privatization, into Babic’s account via the company called Swiss Income Partners from Lugano. That part of the 40 million euro was untaxed, to the detriment of the Serbian state budget. This strange business relationship continued and even after the privatization of Hemofarm, Aktiva Sei BV and Babic were joint investors in agriculture. Namely, Aktiva has a 63.19 percent share in the company Ecoagri Serbia from Bela Crkva, which is publicly registered as Babic’s, although according to the Business Register Agency, Aktiva has a 36.89 share in the company. In addition, there are irregularities regarding the registration of the assets of the Hemofarm Foundation, which was not done in line with the relevant law, so now, the new German owners are forced to give some of the Foundation’s assets back to their initial owners in the process of restitution because a court decided so”,  says our source.

Babic: I am begin set up, Hemofarm’s privatization was most transparent privatization ever

Miodrag Babic, former CEO of the Hemofarm Group, denies any irregularities in the company’s privatization. He warned the Blic’s journalists that it was not professional to send him questions via Ecoagri Serbia, during the holiday season.

“The insinuations against my work have been made many times in the past. They are the result of malicious interpretations and accusations without proper argumentation of a former associate of mine. The subsequent investigation has confirmed that these malicious claims were not true. Hemofarm’s privatization was the most transparent privatization ever carried out in Serbia. In the 1990s, the price of one Hemofarm’s share was only 2 German marks, while, at the time of the company’s sale to Germany’s Stada it was 149 euro per share. Such a price was the reason why one of the leading Serbian politicians told me that we sold the company to the Germans for the price that was too exuberant”, says Babic.

He also denies that Hemofarm Foundation assets are included in the company’s price.

Furthermore, he denies having any connection to the company Swiss Income Partners from Lugano. He also claims that the Ecoagri Serbia Company was founded in 2013, although according to the data from the Serbian Business Register Agency, Ecoagri Serbia was formed in 2007.

“Swiss Income Partners and I have been intentional partners in joint businesses in export-oriented organic agriculture since 2013. Following the initiative of the majority partner, this joint venture is the only holder of the BioSuisse certification in our region, and the bulk of production is being exported to Switzerland”,  Babic explains.

(Blic, 29.08.2018)



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