Another business in which Andrej Babiš, as an entrepreneur, is doing well, especially after entering politics, is the wood processing industry. The business in which he fought predatory battles developed organically, especially during the period of this chapter of the History of Corruption, thanks mainly to the bark beetle calamity. Here, too, the contracts of companies belonging to the politician increased at a faster rate than those of their competitors.
Historically, the state-owned enterprise Lesy ČR has been one of the state companies that has done most business with companies connected to politicians.
Up to 9.1 percent of all State Forests’ contracts up to the period of this chapter were concluded with contractors in which politicians had ownership stakes. These were lucrative contracts, accounting for up to 20.9 percent of the value of all public contracts awarded by the Forestry. A large part of these contracts were concluded with companies whose earnings go to the end user of the benefits, Andrej Babiš.
He had a total of three handcuffs in the fire. He was the end user of benefits in three companies – AGF Wood, Wotan Forest and Uniles. Historically, these companies had participated in public tenders issued by the Forests of the Czech Republic or another state-owned company, Vojenské lesy a statky ČR (belonging to the Ministry of Defence), with a total value of more than CZK 100 billion. Babiš’s companies are among the clear winners of business with the state, and this has been confirmed especially during the period when the end user of their benefits was sitting in the Straka Academy.
When writing the book My State, My Company, I came across contracts for AGF Wood with a total value of at least CZK 5.3 billion excluding VAT. More interesting is the value of public contracts for Wotan Forest. The company, whose final beneficiary was Andrej Babiš, participated in public contracts with a total value of at least CZK 9.3 billion before he entered politics. Since Babiš entered politics, the total has been at least CZK 10 billion, excluding VAT.
However, the success of the timber companies from Andrej Babiš’s trust funds is most clearly underlined by the development of the deal between the state and Uniles. Before Andrej Babiš entered politics, the leader of tenders in the forests of the Czech Republic won contracts with a total value of at least CZK 11.4 billion excluding VAT. However, after Babiš entered politics, the company won contracts with a total value of at least CZK 107.6 billion excluding VAT.
The almost tenfold increase in trade is partly due to the bark beetle calamity and the megatrends of the Forest Service looking for processors for bark beetle infested timber. However, the significant growth in orders was most pronounced for Uniles.
The forests of the Czech Republic manage a total of 1.2 million hectares of forest property owned by the state. The company is based in Hradec Králové and its organisational structure has three levels. The first tier consists of the headquarters, the second of seven regional offices – regional directorates, five forestry plants and one seed plant. The third level of the organisational structure consists of forest administrations. Evil tongues claim that the success of Babiš’s companies in trading with the state-owned enterprise is due to the personal connection of some key positions of the enterprise to companies from the portfolio of the big businessman and the politician. However, due to the extensive and opaque structure, this hypothesis cannot be confirmed. Moreover, even personal connections may not imply clientelism in a highly specialised sector.
Moreover, Andrej Babiš’s companies were personally linked to the forests even before he entered politics. For example, the former CEO (2009-2012) was even the deputy chairman of the board of directors of the Agrofert Group before his tenure at the state-owned company. After Babiš’s entry into politics, it is more likely that the nominations to important positions in the state-owned company were made by LESS & FOREST, which has a rich history with Andrej Babiš’s business. In some cases, such as Petr Moravec as a member of the supervisory board, they were also nominees of the ANO 2011 movement.
Andrej Babiš’s business empire managed to make a major breakthrough into the wood processing sector around 2010. It was connected with LESS & FOREST. At that time, Babiš started negotiations to take control of the leader of the forestry business in the Czech Republic, the Wotan group. The latter was involved in forestry and logging and wood processing. As the operator of the entire production cycle, it was therefore an ideal opportunity to penetrate the sector.
The Agrofert Group made no secret of the fact that, despite its zero experience in the industry, it had won the favour of the seller, mainly thanks to its almost unlimited capital possibilities. A similar model and advantage was also true for the next major expansion of the forestry business with Uniles in 2012.
Another opportunity fell into Agrofert’s lap out of the blue. The Less group, despite its strong position in business with the state and timber processing in general, started talking about existential problems.
At the end of 2012, the company, which had ruled the industry for twenty years, even admitted debts of about CZK 1.5 billion to the state-owned Forestry of the Czech Republic. Even though the Czech Forestry itself sued for over CZK 6 billion in lost profits, it was inevitably heading for bankruptcy. Andrej Babiš appeared at that moment. Again, this was no coincidence. As it later turned out, the owner of the Less group, Jan Mičánek, had long cooperated with Babiš and even coordinated the media presentation at the time of the company’s problems in order to convince creditors of the suitability of Agrofert’s entry into the company.
Mičánek was even an advisor to Agrofert’s entry into Wotan. Less was also to draw substantial operating loans from Agrofert. However, these were mysteriously not recovered by Agrofert after Less declared insolvency. For a short period of time, however, Agrofert became the saviour of a company with several thousand employees.
According to the restructuring plan from October 2013, the bankruptcy of Lessu was to be replaced by a turnaround in which the company would be bought by Agrofert and creditors would be satisfied by the sale of necessary assets. After the turnaround, the company Nový Forest was to be created. The operating assets were to be transferred to it.
However, in 2014, after a few months, another unexpected turn occurred and Agrofert withdrew its offer. The reason for this was the unsolvable disputes between Jan Mičánek and Lesy České republiky. The bankruptcy resulted in a big battle for the Lessa companies. Agrofert also won the battle and, as in some other similar cases (e.g. Deza), ended up buying cheaper in the insolvency proceedings than in the eventual recovery.
Andrej Babiš’s group bought mainly Mičánek’s forest nurseries, transport division and mining machinery. He then moved all the assets under his flagship company Wotan, making Agrofert a leader in the timber market as well.
