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Cablegate: Croatian Pm On Defensive Over Takeover Bid For

VZCZCXRO1174
RR RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHVB #1050 2481208
ZNY CCCCC ZZH
R 051208Z SEP 06
FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC 6590
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

C O N F I D E N T I A L ZAGREB 001050

SIPDIS

SIPDIS

EO 12958 DECL: 09/05/2016
TAGS ECON, EINV, PREL, HR
SUBJECT: CROATIAN PM ON DEFENSIVE OVER TAKEOVER BID FOR
PHARMACEUTICAL COMPANY

REF: ZAGREB 815

Classified By: Ambassador Robert A. Bradtke for reasons 1.4 b and d.

1. (C) Croatian Prime Minister Ivo Sanader called Ambassador on September 4 to express his concern over an article on the Croatian on-line news site index.hr alleging that Sanader was colluding with Chairman of Pliva Pharmaceuticals Zeljko Covic and former FM Miomir Zuzul to tip the sale of Pliva in favor of US pharmaceutical company Barr Labs. The article also included a reference to an interview the Ambassador gave in July to a leading Zagreb news magazine, in which he said that Barr’s acquisition of Pliva would be a positive signal of confidence in Croatia’s investment climate. It went on to suggest that Sanader believes that Pliva must go to a US company in order to maintain good bilateral relations with the United States. Sanader was clearly upset by the allegations, which he said were the opening salvo in what he predicted would be a “very dirty” opposition campaign to discredit his government over the Pliva sale. He told the Ambassador that he would rebut what he said were untrue allegations and asked if the Embassy would also respond with a press statement, given that an American company is involved and that the article mentioned the Ambassador. The Ambassador agreed to issue a statement (text at para 4) reaffirming simply that the sale of Pliva must be decided by market forces in a transparent way and in compliance with all laws and that the outcome will have no effect on U.S.-Croatian relations.

2. (C) Pliva Pharmaceuticals, one of Croatia’s largest and most successful companies (in which the GOC still retains an 18 percent share), is the object of competing takeover bids by US Barr Labs and Icelandic Actavis. Barr’s initial 2.3 billion dollar offer for Pliva was countered last week by a 2.5 billion dollar offer from Actavis. Barr is now expected to counter this offer in a process that may not conclude until early October. The Embassy has been in contact with Barr’s representative in Zagreb, who is thus far satisfied that the process, although clearly straining Croatia’s small and untested regulatory capacity, is being carried out in a transparent way and in accordance with standards that are being upheld equally for both sides.

3. (C) Comment: Although we have no indication of impropriety thus far over the sale of Pliva, a transaction of this magnitude is a first of its kind for Croatia and clearly a challenge for its regulatory mechanisms. With the share price of Pliva up nearly sixty percent since earlier in the year, it seems quite likely that the sale will provide the press with scandals both real and imagined for a long time to come, particularly with elections approaching in 2007.

4. (U) Embassy response to index.hr article: Regarding a September 3 article by Index.hr about the ongoing negotiations over acquisition of Pliva Pharmaceuticals, the Embassy has always urged that the process be open and transparent. We expect any American company to operate fully under both U.S. and Croatian law, and Barr has assured us they are doing so. In his interview with Globus on July 21, 2006, Ambassador Bradtke said, “If Barr successfully buys Pliva, that will have a very positive effect on other American companies that wish to expand to the Croatian market.” The U.S. Embassy believes that purchases of companies should be based on economic criteria. Whatever Pliva shareholders finally decide regarding the future of their company, relations between the United States and Croatia will continue to be strong. BRADTKE

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