Podravka is conducting due diligence to potentially buy the agri-food business of fellow Croatia-based group Fortenova.

In a statement posted on its website, Podravka said it has been “invited” by Fortenova to “participate in the process of due diligence”.

The baby food-to-breakfast cereals maker said it had made a non-binding offer for Fortenova’s agriculture division before engaging in the process. That offer remains non-binding, Podravka added.

“Only upon completion of [the] due diligence process Podravka will decide on [the] potential submission of the binding offer for [the] acquisition of Fortenova Group’s agricultural companies,” the statement read.

Fortenova said in January that it had put the feelers out to test market interest in buying the division, with the expectation of receiving non-binding offers by the end of the first quarter.

In a statement, Fortenova said it had garnered a “number of non-binding offers” since January.

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“After conducting additional discussions with the buyers, Fortenova has decided to proceed to the next stage of the potential divestment process by inviting a number of selected local and regional buyers to take part in a due diligence phase, after which the potential buyers will provide final binding offers,” Fortenova said.

The company added that it “will assess the final binding offers, not only on price but also in respect of how the buyer will propose to be a strategic partner for the agriculture division as well as Fortenova”.

Fortenova had previously said it wanted to use the proceeds from the division’s sale to reduce debt and make “strategic investments” in the “core business areas” of retail and food.

The group’s agricultural business division includes operations such as meat processor Belje, vegetables supplier PIK Vinkovci and pig breeding-to-winemaking business Vupik.

Fortenova’s retail arm comprises supermarket chains Konzum and Mercator. Its food unit includes condiments and edible oils business Zvijezda, cheese maker Agrolaguna and soft-drinks company Jamnica.

Fabris Peruško, Fortenova’s CEO and board member, said in the statement update: “We are happy to enter the due diligence phase with several exceptionally strong potential partners. Although we are now about to enter the due diligence phase, the final completion of a sale still depends on finding a strategic partner that will recognise the full value and potential of this business and its people.”

Fortenova did not name any of the companies involved.

Three years ago, the company sold its frozen-food assets to Birds Eye and Iglo giant Nomad Foods.

Podravka, meanwhile, launched a new five-year business plan in 2021 under which it said at the time would include acquisitions.

The branded and own-label food manufacturer said then that the 2021-25 plan envisages an investment of Hrk5bn ($812.7m at the time) across its two divisions – food and pharmaceuticals.

As well as M&A, the two other areas of the plan revolve around increasing efficiency through the modernisation and digitalisation of its production and logistics, along with a “focus on select markets and production categories”.

It added in the website statement on the due diligence process: “Podravka Group is strategically focused on business development that includes potential acquisitions, as well as investments and development of [the] agricultural segment.”

Late last year, a majority of shareholders in Fortenova voted in favour of an ownership restructure of the business under a newly-formed Dutch holding company.

The transfer-of-equity proposal, for as much as €660m (then $722.8m), is anticipated to close in the second quarter of next year and includes a provision to compensate sanctioned equity holders for their loss of interest.