PERSONAL REASONS - There are more and more signs that Rajic decided to cash his own in Three and a half weeks were sufficient for Luka Rajic, the most successful Croatian tycoon after Ivica Todoric, to close the negotiations on the sale of his dairy empire and hand Dukat over to one of the world's leading dairy companies, France's Lactalis, for about 280 million euros, causing an uproar among both politicians and business leaders. More precisely, Rajic for 2.05 billion kunas sold 92 percent of his shares in the company that is, as of recently, again called Dukat, after the former Zagreb company that formed the core of Rajic's business empire. Dukat now has production facilities in Zagreb, Bjelovar and Sombor and in affiliated companies in Bosnia & Herzegovina, Slovenia and Macedonia.

And although he has sold the company he patiently built, with ups and downs, over the past 13 years, 43-year-old Luka Rajic is not pulling out of the business world. He will use the money he has earned with the sale of Dukat for new investment and business ventures. A well informed source close to Luka Rajic has reveal to Nacional that the, now former, owner of Dukat will continue to invest in Croatia and that he is open for any project. Where the not insignificant amount of money garnered from the Dukat sale will end up is not know for the moment. The project is already being prepared by a team of experts gathered around Rajic's managers from Dukat Ivan Klicek and Gordan Radin. Rajic has given them a carte blanche under the condition that they avoid the food industry, into which Rajic never wants to invest again.

Judging by the short period in which Lactalis was able to carry out their due diligence of Dukat, is can be inferred that the transaction had been agreed upon much earlier, and that only the price had been at issue. It is somewhat under Dukat's earnings last year of 2.2 billion kunas. The price and way in which Dukat was sold, and the fact that the company has been restructured and has no major debts, points to a conclusion that Rajic could have gotten more money for his company. A high ranking source from Dukat, however, has told Nacional that it was Rajic's goal above all to bring in the best partner, who could ensure Dukat's continued successful operation. Rajic was focused on development and on social issues and, with the help of consultants, choose Lactalis, who he is convinced will create the conditions needed for Dukat's entry into the European Union. He could have opted for an open sale, where in a field of bidders he could get a better price. This has been confirmed by a source near Rajic: "Luka Rajic is very concerned about how Dukat will develop in the future because, in the psychological sense, Rajic identifies himself with Dukat. That is why he will spend another year in the company. He consciously reduced the price he would get for Dukat because the developmental aspect was important for him. He simply did not want to let suppliers and employees down", says Nacional's source.

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A SHOW OF POWER - On Monday 26 March Ivica Todoric pulled Dukat's products from the shelves of his Konzum chain because Rajic did not inform him of the sale of his companyIf that is correct, the show of concern of the past few days over the future of the Croatian dairy industry on the part of the ruling party's politicians is entirely unnecessary. That Rajic led his negotiations with Lactalis in strict secrecy is demonstrated by the reactions of the politicians, especially of Prime Minister Sanader and deputy premier Damir Polancec, but also by the vehement reaction of Ivica Todoric who said he was cutting off cooperation with Dukat. Government had queried Rajic concerning the possibility he could sell Dukat, but Rajic had told them he had no such intentions. They caught on that Rajic wasn't telling the truth on 27 February when it was announced that Lactalis was carrying out due diligence of Dukat's operations. The panic among politicians is to some extent understandable because the dairy industry is a strategic sector on which hundreds of cattle breeders depend, living off the milk that Dukat buys from them. As its only owner, Rajic could have sold the company to anyone, and under any conditions, if he was satisfied with the offered price. This practically means that Dukat could have been taken over by a company that would not have maintained production, leaving cattle breeders out in the cold. Given that a great number of these farmers are from Slavonia, where the latest polls have the HDZ party losing voter support, a development like that would leave Sanader with new quandaries ahead of the parliamentary elections.

Ivica Todoric's reaction, however, is not entirely clear. He's in a huff because no one from Lactalis has contacted him. The behaviour of the French, as can be read into the Agrokor press statement, offended him, and he was, allegedly, left with no choice but to throw most of the Dukat product line off his shelves. "The actions of the French company that purchased Dukat, and did not in any way contact or inform the largest partners of that same company, we consider at the very least unprofessional and disparaging towards the market into which it is coming. If this is the way it behaves towards a company with whom it earns hundreds of millions of kunas of turnover, one wonders how it will behave towards small partners", reads the statement from Todoric's Agrokor. It is also not clear from the statement why private businessman Todoric is reproaching private businessman Rajic for "telling the deputy premier of his Government, Damir Polancec, one thing and doing another."

It is hard to imagine Konzum getting rid of the Dukat with which it achieves a turnover of several hundred million kunas because of the impolite behaviour of its partners, as Agrokor vice president Ljerka Puljic has said. It is more likely that Todoric, in coordination with Government and united in a consortium of Croatian companies, had wanted to buy Dukat. On the other hand, Todoric's demonstration of revolt can be seen as pressure on the new owner of Dukat aimed at securing more favourable retail rebates. Whatever the case, the Government's and Todoric's reaction to the sale of Dukat to the French will certainly resound negatively among European and global investors. People close to Luka Rajic say that he was drained by the fighting with retailers, whose steep rebates are slowing the expansion of the dairy industry. Rajic on his own simply did not have the strength and power needed to get around the big retail chains on whom the sale of all Croatian producer goods is dependent on. The strained relations between Luka Rajic and retailers is not news. Rajic and Todoric only managed to close a business deal in 2004 after a full seven years of no Dukat products on Konzum shelves. The reason was a personal squabble between Ivica Todoric and Luka Rajic over the level of mark-ups and payment schedules. Rajic had been unwilling to accept Todoric's conditions, and the Agrokor owner was only mollified when Rajic himself withdrew from the negotiations. Duro Gavrilovic did much the same as Rajic, compensating for a lack of shelf space in Konzum stores by buying the Diona retail chain.

RAJIC BOUGHT DUKAT for 5 million euros, modernising it and selling it 13 years later for 280 million eurosThere are more and more signs that Luka Rajic decided to cash in his business empire for private reasons. He drew a great deal of media attention last year when he announced that he was divorcing his wife Borna Rajic with whom he has three sons. The apparently happy marriage fell apart in Geneva where the Rajic's moved only two years ago, allegedly because of the attempted kidnapping of one of his sons. Rajic in 2003 purchase the small Swiss chocolate factory Favarger, currently his only business. The Rajic's continue to be citizens of Geneva – Luka has a small building in the centre of town and his former wife and sons live in a house on Lake Geneva. It is not known how the former couple divided the real estate they own in Zagreb and its environs – the 5-million-euro Okrugljak villa, a Samobor manor worth 7 million euros and the 250 square metre apartment in downtown Bakačeva Street. It is estimated that the divorce cost Rajic about 40 million euros.

And regardless of the credit Rajic deserves for transforming Dukat into one of the strongest Croatian companies, sources close to him say that he has become aware that he is beginning to be a brake to the company's further development. The same sources reveal that there are two key reasons why Luka Rajic decided to sell Dukat. "First there is Rajic's personality and nervousness in a business environment. As an individual, the absolute ruler in Dukat, he was unable to implement some operative plans, which especially came to the fore in an attempt to expand in the region. He was also discouraged in his unsuccessful bid, lead by a team headed by former director Zeljko Peric, to turn the Lura Company into a regional food industry player. The other reason for the sale is a large investment cycle facing Dukat. The acquisition and modernisation of three factories are in the works in the preparation for the European Union market. A large-scale investment into Sirela is to kick off soon and the projects for Bosnia & Herzegovina and Macedonia are ready", said Nacional's source. Although they have obliged themselves to not go public with the details of the contract for the moment, it is clear that the implementation of these investments was one of Rajic's conditions in selling Dukat to Lactalis.

There has been news in the press several times over the past seven years that Rajic was selling Dukat, formerly the Lura Company. He held serious negotiations with Italy's Parmalat, France's Danone and with TDR (Tvornica duhana Rovinj), but Rajic would always change his decisions at the last moment. An anecdote relates that the negotiations with the Rovinj-based were over, the contracts on the table and the champagne ready to be opened. A few minutes prior to the signing of the contract Rajic called and informed the gathered that he was backing out of the 180 million euro transaction. The only thing that had happened was that then Lura director Zelimir Vukina had transferred to TDR, and Rajic since than has had the reputation of being Croatia's most capricious businessman. He confirmed his reputation as an unpredictable person two years later when he unceremoniously dumped Vukina's successor at the head of Lura, Zeljko Peric, who had tried, allegedly following Luka Rajic's conception, to restructure Lura and turn the dairy company into a large food industry in a regional framework.

This time Rajic did not back out. That he was ready to sell Dukat was already clear last year when he started to clear the company of all segments not a part of the dairy business. He sold the Sloboda cookie factory he had purchased only two years earlier, while a beverages bottler with exclusive rights to the production and distribution of Pepsi was made a separate company and purchased by Badel 1862. Dukat then became a solely dairy business that also included the Somboled Company in Serbia.

In selling Dukat to Lactalis, Luka Rajic became the first Croatian tycoon to have cashed in a business created in the 1990s. His is, besides that, the only tycoon name to have emerged from the privatization and transformation process, along with those of Ivica Todoric and Dragutin Biondic, never to have been associated with scandal. While many political suitables got companies for a song in the transformation and privatisation process, and bled them dry of money with them aim of ruining them and make a profit on the sale of their real estate, Rajic patiently built the business empire virtually out of nothing.

Luka Rajic was born in 1964 in Konjic in Bosnia & Herzegovina and grew up in Zagreb's Sesvete suburb, in a part of town popularly known as Little Bosnia, with his parents and six brothers. Their poverty saw his father enrol him in the Zagreb Police Academy, but since he had already them started various odd jobs, he transferred after his first year to Nikola Tesla Secondary School. As he told Nacional in a 1996 interview, he would, at the time buy fruit at the wholesale market and sell it at the Dolac market. By the end of secondary school he had seven stalls were he employed fellow school goers. "By the end of high school, in 1984, I had 60 thousand German marks", Rajic then told us.

He started working in Dukat as a truck driver in 1985, after returning from military service where he had acquired a category C driver's license. He also got into the business of retailing consumer goods. "I would buy 50 tons of cement and resell it. There was a lack of construction material at the time", Rajic said in the interview 11 years ago. He opened a self-service store in Sesvete and two years later a café with slot machines. "I made 250 thousand German marks and bought a used truck", said Rajic. Rajic rode the wave of change sparked by the late 1980s Markovic reforms and set up a haulage company called Ralu that also made shipments for Dukat. As he told Nacional, the conception of Rajic's future business empire took place in then Czechoslovakia. "I saw that there was a great disparity in pricing so I asked the responsible people at Dukat if I could offer them cheeses. I went to Bratislava where I closed a deal with the foreign trade company Impex on the purchase of cheese. I started with 20 tons, and that grew from day to day, and in a short time I had to open a foreign trade firm we called Lura." According to Rajic, by 1991 that company already had a turnover of 20 million German marks. In 1992, he acquired Dukat shares for 20 thousand German marks in the transformation. He went on to buy up shares from the Croatian Privatisation Fund and from small shareholders, and became majority owner by 1994, investing a total of 10 million German marks into Dukat shares. He earned that much last year alone in Dukat dividends. There were rumours that Rajic had earned a tidy sum transporting in his trucks the Yugoslav dinars that Croatia was exchanging for foreign currency in Bosnia & Herzegovina. Unlike Hrvoje Petrac, Rajic never confirmed the veracity of these rumours. After Dukat, Rajic purchased Bjelovar's Sirela and Zadar-based dairy company Mljekara Zadar, and formed the Lura Group, named by using the first two letters of his name and surname, which went on to become, along with Varaždin's Vindija, the most respectable dairy industry in the region.

The company will soon become a part of an international dairy group based in France's Laval Lactalis was founded in 1933 by André Besnier and it has remained to this day in the family's ownership. Lactalis products, of which the best known are the Président, Société, Bridel and Lepetit brands of cheese and dairy products, are sold in 140 countries. The company employs 30,000 people, of which 13 thousand outside France, with forecast earnings this year of 9 billion euros. Given the numbers, Dukat is not a large acquisition for Lactalis. For 280 million euros the French got a stable company with a strong brand, which could serve as an excellent starting point in spreading into Eastern Europe. Besides, Dukat has with the sale of the cookie and beverages factories paid off most of its debts. Rajic now has to do that in his personal affairs. As Nacional was told by a friend of Rajic's, Luka Rajic wants to take a break, clear his debts and start a new life.