Liquidity in the Turkish banking market proved critical to the $3.25 billion acquisition of a 50.8 percent stake in Turkish retailer Migros Turk by a consortium led by BC Partners (see also feature on p62).
Once the central weakness of the Turkish buyout market, the availability of local debt facilitated the biggest European buyout since the turmoil in the credit markets began. The deal is also the biggest ever private equity-backed buyout in Turkey and the country's first public-to-private transaction.
Senior debt from Garanti Bank, Is Bank and Vakifbank will support the deal. A source close to the consortium in Istanbul said that no international banks would have been willing to provide sufficient finance for a deal of this size. “The Turkish banks have grown their balance sheets in recent years and have done some big deals,” he said. The Governor of the Turkish Central Bank, Durmus Yilmaz, said recently that “the Turkish banking system is in excess liquidity” and that the banks had no exposure to the sub-prime market.
Turkey's banks have other reasons to be comfortable about backing this buyout. Migros, which is being sold by the Koc Group, occupies an exceptionally powerful position in the domestic food retail market with its 900 stores: locals describe it as the “Wal-Mart of Turkey.” Its nearest rival, Carrefour, is about half its size. Growth in retail spending has encouraged the private equity consortium to back a big expansion programme.
What is more, the banks have also had the opportunity to see several LBOs take place in the country, notably KKR's $1.3 billion purchase of UN Ro-Ro last year and have become more familiar with the model.
In its battle to buy Migros, the BC Partners-led consortium, advised by Merrill Lynch, fought off rival bids by Kohlberg Kravis Roberts and Blackstone, which had joined forces with Croatia's Agrokor. Other members of the successful consortium included local pioneer Turkven Private Equity and Italian firm DeA Capital.
BC Partners has been active since the credit crunch. In February it closed the $16.5 billion Intelsat deal.
HSBC RETURNS TO UK PRIVATE EQUITY
HSBC Private Equity has bought a minority stake in UK-based Transmission and Distribution Group (TDG) from Singapore investment firm Prime Energy Partners for an undisclosed sum. It marks a return to home territory for HSBC's revamped private equity business. HSBC's former UK private equity arm was spun out from the bank in 2003 as Montagu Private Equity. The present private equity division describes itself as a UK mid-market firm investing in firms with an equity requirement of £5 million (€6.7 million; $9.8 million) to £50 million. TDG is the parent of Diagnostic Monitoring Systems, supplying products which detect fault and breakdowns in electrical transmission and networks. Law firm DLA advised HSBC and TDG, UK law firm Shepherd & Wedderburn advised HSBC and management while US law firm Latham & Watkins Financial advised Prime Energy Partners.
ARGOS SODITIC MAKES A 10X RETURN ON MAILLEFER
Swiss buyout firm Argos Soditic has sold domestic cable machinery producer Maillefer Extrusion to Alpha Groupe. Terms were undisclosed but the firm said in a statement it had made a 10 times return on its investment. Argos Soditic bought Maillefer in 2001 from Nokia-owned manufacturer Nextrom. Argos Soditic and Maillefer's management team restructured the business model from a manufacturer to an outsourced provider of services to the wire and cable industry. Maillefer's sales grew from CHF100 million ($91 million; €63 million) in 2001 to CHF270 million in 2007. Guy Semmens, the partner at Argos Soditic who led the transaction, said in a statement: “Despite difficult market conditions from 2001 to 2004, the management team at Maillefer stuck to the long-term strategy of moving to a flexible, outsourced model which would create value once the markets recovered.”
MEZZ MANAGEMENT BACKS WIS GROUP
Mezzanine Management, an independent mezzanine and private equity firm, is investing €18.6 million in WIS Group, a German provider of security services, technology and systems. The investment, made alongside lead investor Argantis, a Cologne-based private equity fund, will include equity and mezzanine capital to support the management buyout of the company. The deal underlines the resurgence in interest in mezzanine finance.
The former shareholders will retain a stake in the business. The management team will also invest in the equity with senior debt provided by Sal. Oppenheim & Cie. This is the eighth investment from MM Fund IV. It follows the firm's recent investments in Baxter Storey, a UK contract caterer, in December 2007 and TNT Crane & Rigging, a full-service crane and rigging operator based in Texas, in November 2007.
3I LOOKS TO HEALTHCARE FOR SHELTER
3i has bought UK laser eye surgery company Ultralase for £174.5 million ($342.4 million; €233.2 million) from European medical business Corporación Dermoestética. 3i, which intends to expand Ultralase, expects the laser eye surgery industry to increase revenues at 12 percent per annum, with significant increases in the next five years. This would bring the UK in line with more developed markets for the treatment such as the US, Canada and Spain. 3i has previously invested in Spanish opthalmology company Clínica Baviera, which had a €300 million initial public offering on the Spanish Stock Exchange in April last year. The health sector has proved popular with buyout firms in search of a defensive sector as a shelter from turbulent markets in recent months. Recent activity has included 3i's acquisition of pharmaceutical company Active Pharmaceutical Ingredients for $395 million (€269 million). .
HELLMAN & FRIEDMAN AGREES $310M DEAL
Hellman & Friedman has bought a 30 percent stake in Gaztransport & Technigaz (GTT) from Italian oil and gas contractor Saipem for €310 million ($451 million). The company is a French marine engineering firm that builds membranes for the storage and transport of liquefied natural gas via ship. French oil giant Total also owns a 30 percent stake in GTT, while French natural gas company Gaz de France holds a 40 percent stake. For Hellman & Friedman, the investment touches upon several sectors it frequently targets, according to Luca Velussi, a Hellman & Friedman director. “GTT's business sits at the intersection of our energy and technology practices and our expertise in investing in people businesses,” Velussi said in a statement. The San Francisco-headquartered private equity firm also completed its investment in heating and air company Goodman Global, a $2.65 billion deal. Its most recent fund closed in May 2007 on $8.4 billion.
BRIDGEPOINT SNACKS ON PRÊT A MANGER
European mid-market firm Bridgepoint has acquired UK sandwich chain Pret a Manger, according to a statement. Terms were undisclosed but a source close to the deal said the buyers paid £345 million (€678.7 million; $457.5 million). Goldman Sachs has taken a minority stake alongside Bridgepoint's bid after advising on the transaction.
The sale had been planned at around £450 million last year, according to the source. The substantial discount may signal one of the first examples of vendors adjusting expectations in reaction to the problems in the worldwide credit markets. Pret a Manger has 200 shops in the UK, the US and Hong Kong and in 2007, its turnover was £223 million in 2007 up from £194 million in 2006. The founders will be significantly reinvesting in the business, while global fast food chain McDonalds will fully exit its 33 percent stake.
LION BUYS INTO SWISS BAKERY FIRM
Lion Capital bought a 32 percent stake in Swiss deep frozen bakery products company Hiestand yesterday for an undisclosed sum. Lion is acquiring 170,000 shares in Hiestand. The company's share price was up by nearly 5 percent on yesterday morning to CHF2320 per share at 1036CET today. Based on this share price Lion's stake would be valued at CHF394.4 million (€244.6 million; $362.7 million). The seller was undisclosed, but news agency Forbes reported on Wednesday that hedge fund Focus Capital was looking to sell its around 30 percent stake in the company. This led to a decline in the share price of nearly 10 percent on last week despite yesterday's rise.
The European buyout firm has previously bought Vaasan & Vaasan, a Nordic baker and Weetabix, a UK breakfast cereal company.