The deal with Arion will see key executives keeping a slice of the company worth around ISK 330 million (EUR 2.07 million). They will not pay anything for the shares and will not need to pay tax on them either, according to the contract with the bank.

Having made the deal, Arion will now be able to sell on the remaining 97.5 percent of the company.

Hagar runs many of Iceland’s biggest shops, including the Bónus and Hagkaup supermarkets.

Vísir.is reports that Arion Banki has not released any details about which Hagar bosses will be given shares; but it is known that current president of the company Finnur Árnason is among them.

The latest reports value Hagar at around ISK 13 billion (EUR 81.35 million). The stake being gifted to its former execs is worth around ISK 330 million, and is therefore around 2.5 percent of the business.

Tiu-ellefu ehf. (better-known as 10-11) runs 23 convenience stores across Iceland.

10-11 was split off from Hagar and put under the control of a specially created company called Eignabjarg after Arion Bank took over the Hagar retail empire. Hagar used to be owned by Johannes Jonsson and his family, including his son, Jon Asgeir Johannesson.

The advertisement which appeared today states that all shares in Tiu-ellefu ehf. will be sold in one go. The sale will be open to all investors who can show they are able to afford the chain and have instantly available liquidity to a minimum value of ISK 300 million (EUR 1.81 million), DV reports.

Non-binding purchase offers must be received by Arion Bank on or before 18th May.

Hagar is Iceland’s biggest retail chain and used to include a variety of clothing chains and the Bonus, Hagkaup and 10-11 food stores, among other interests.

Arion made its decision to sell 10-11 separately due to advice that it will raise more money than if it were sold along with other Hagar chains including Bonus and Hagkaup. The bank was also responding to Competition Authority concerns that keeping the group together would not benefit free competition in the food market.

10-11 runs 23 stores in the Reykjavik capital region, in Reykjanesbaer and in Akureyri. They are open 24-7 and employ 230 people. The chain was valued at ISK 4 billion(USD 34.1 million) last year. With 10-11 sold off, Hagar will be left with 38 food stores.

Jonsson and his son Jon Asgeir Johannesson founded Bonus, which would later merge with Hagkaup to become Hagar and then become closely associated with Johannesson’s Baugur Group.

Following bankruptcy, Hagar came into the ownership of Arion Bank which took the surprise decision to keep Johannes Jonsson on the board and guarantee him the right to purchase ten percent of Hagar shares when the company re-lists on the stock exchange. Both decisions have now been reversed, however.

Arion took its decision because Jonsson is the founder of Bonus and knows the company extremely well – so well, in fact, that his usual nickname in the Icelandic media is Johannes from Bonus.

The terms of Jonsson’s departure are that he has a 12-month termination contract, a pay-off of ISK 90 million (USD 742,000) and may not go into competition against Hagar for at least 18 months.

Johannes Jonsson has also been permitted to purchase several of Hagar’s smaller shops at the going market rate. Those shops are Bonus in the Faroe Islands (Hagar’s only overseas property), and Top Shop, Zara and All Saints in Iceland. Despite an ongoing fight with cancer and severe business problems, Johannes has remained a regular and optimistic voice in the Icelandic media since the economic crisis.

The District Court has upheld a Competition Authority ruling from December 2008 that Hagar should pay a fine of ISK 315 million (USD 2.45 million) for abusing its leading market position. The fine is the biggest such punishment ever handed out in Iceland.

Hagar runs large Icelandic retail chains including Bonus supermarkets.

Hagar’s national share of the grocery market is over 50 percent; and over 60 percent in the Reykjavik region. The company broke competition laws by selling certain products at below cost price – especially by selling dairy products far below their true cost in its Bonus stores in response to a competitor’s newly lowered prices on a wide variety of products in 2005, Visir.is reports.

The owners of Bonus put the whole chain into a loss-making position purely to starve out its rivals before putting prices up again, which the Competition Authority felt was against the law.

Kaupass (Kronan supermarkets) and Samkaup (Samkaup, Netto and Kasko supermarkets) hoped to increase their market positions during the 2005 ‘price war’, but Hagar’s tactics ensured that Bonus remained on top.

Arion Banki recently re-floated Hagar on the stock market after taking it over due to the bankruptcy of its former mother company.

Hagar is Iceland’s biggest retail chain, including household names like Bonus, Debenhams, Hagkaup, Top Shop and 10-11 in Iceland. Arion Banki took over 95.7 percent of the company when it took control of owner 1998 ehf, which was itself owned by Jon Asgeir Johannesson and family, best known for their Baugur business which is now bankrupt.

Current Hagar investors will be allowed to increase their stake to 15 percent – including ten percent for Johannes Jonsson, Jon Asgeir’s father. Jonsson will remain chairman of the board.

The remaining 85 percent of the business will be traded on the stock exchange and Arion Banki intends to entirely sell its share. The bank believes the move serves both its own purposes and the public’s, allowing more people to buy a share of the important company.

Current president Finnur Arnasson will remain in his role and be one of the old owners allowed to invest. The remaining four seats on the new board will go to new investors.

Arion Banki defended leaving Johannes Jonsson in charge of the company’s board; saying that he is one of the company’s founders and has largely done a good job over the last two decades or more, leading the bank to believe he should remain a major investor.

Brynjar Nielsson is a lawyer working for Thjodarhagur, the group hoping to put in an offer for Hagar, the Icelandic wing of the Baugur owners’ former empire. Nielsson said that after meeting with the leaders of Arion Bank yesterday, he got the clear answer that Hagar is not for sale. Thjodarhagur has the promised financial backing of over 3,000 investors, including members of the public offering up as little as ISK 5,000 (USD 40).

Hagar runs iconic shops in Iceland, including Bonus, Hagkaup, Debenhams and 10-11. Arion Bank now holds a 40 percent stake in the company, while other owners including Jon Asgeir Johannesson and family continue their search for more funds to prevent the bank taking over the remaining 60 percent.

Stod 2 News reported meanwhile, that British businessman Tom Hunter is among those interested in providing Hagar with the necessary additional capital. The deal would mean Hunter, the current owners and other investors would hold 60 percent in the company while Arion would maintain its recently-acquired 40 percent stake.

Due to open at 11 yesterday morning in Kopavogur, Kostur was unable to open for three hours due to technical difficulties with price tags and the computer system. Once customers were allowed inside, they were still unable to purchase products straight away. However, the shop is now fully operational and will be open seven-days-a-week. The shop is located near the Smaralind shopping centre in Kopavogur, a town a few minutes’ drive from Reykjavik.

Sullenberger is known as the former friend and business partner of Jon Asgeir Johannesson who turned star witness in court cases against the former Baugur boss following their falling out.

Kostur is designed to give value conscious Icelanders an alternative to Bonus, which is run by Jon Asgeir and family’s Hagar. The success of Kostur will depend on its ability to provide products at similarly low prices to Bonus – a feat low price competitors Kronan, Fjardarkaup, Netto and Kasko have struggled to achieve.

Hagar has also been in the news recently following Kaupthing’s acquisition of a 40 percent stake in partial payment for the company’s massive debt. The bank could still end up taking over the entire business if Johannesson and his partners cannot secure new finance. Click here to read about the story.

(Photo: RUV.is)