BC Partners Ltd. has agreed to buy Migros Türk, Turkey's largest supermarket chain, for about $3.2 billion in the country's biggest-ever leveraged buyout. The London-based buyout firm will acquire 51 percent of Migros Türk for YTL 1.98 billion ($1.7 billion), or YTL 21.85 a share, from Koç Holding, according to a filing with the Istanbul Stock Exchange yesterday. The firm said it will offer to buy out minority stockholders at the same price, which is 11 percent more than Wednesday's close. BC Partners will gain 961 stores in Turkey and nearby countries through the takeover, and plans to profit by boosting the supermarket's share of grocery sales at the expense of street vendors, who control about 60 percent of the market, according to a national industry group. Turkey has 17 supermarkets per million people, compared with 150 in the European Union, according to accounting firm PricewaterhouseCoopers LLP. “Penetration of organized retail is very low in Turkey and companies like Migros Türk have high growth potential and will increase their market share,'' said Murat İğnebekçili, an analyst at EFG Istanbul Securities. Migros shares fell Ykr 60, or 3 percent, to YTL 19.20 at 10:45 a.m. in Istanbul, bringing its value down to YTL 3.42 billion. Koç Holding shares advanced Ykr 12, or 2.5 percent, to YTL 4.84.
The price is “5 percent below our valuation,” Yonca Yağcıoğlu, an analyst at Ata Invest, said in a note to clients today. She expected the sale to value Migros Türk at YTL 4.1 billion instead of the YTL 3.9 billion sale price.
Rapid growth
“Migros is ideally positioned to benefit from the rapidly growing organized food retail market,” BC Partners executive, Nikos Stathopoulos, said in a statement yesterday.BC Partners beat off rival bidders including buyout firms Blackstone Group LP and Kohlberg Kravis Roberts & Co., and Russian billionaire Mikhail Fridman's Alfa Group. Paris-based Carrefour SA, Europe's biggest retailer and No. 2 in Turkey, dropped out of the bidding on Jan. 7 without citing a reason.The takeover is BC Partners' first in Turkey, and the biggest by any buyout firm in the country, surpassing KKR's $1.3 billion purchase of shipping company UN Ro-Ro in October.Founded as Baring Capital Investors in 1986 by Dutchman Otto van der Wyck, BC Partners manages a 5.8 billion-euro ($8.5 billion) private equity fund. The firm's other investments include British real estate agency chain Foxtons and satellite operator Intelsat.Buyout firms are struggling to get financing from Wall Street banks for their takeovers in the wake of the subprime mortgage crisis in the United States and are turning to markets outside the U.S. and Western Europe, where targets are typically smaller and local banks are able arrange funding.BC Partners tapped three Turkish banks to finance the Migros Türk buyout. Garanti Bank, İşbank and Vakıfbank are arranging loans to fund the takeover, BC Partners said. DEA Capital, a unit of Italy's de Agostini SpA, said it will invest as much as 175 million euros ($256 million) alongside BC.Turkey has attracted about $40 billion of direct foreign investment in the past two years. Retailers from Carrefour SA to Britain's Tesco Plc have opened stores in the country to tap economic growth that has averaged 6.9 percent annually since 2002, helping to double per capita income to about $6,900.Dusseldorf, Germany-based Metro AG also has a supermarket chain in Turkey and opened its first Turkish Media Markt consumer electronics shop in September in Istanbul.
Unregistered economy
Retail sales in Turkey were $137 billion in 2006, about 40 percent of which was registered, according to the Turkish Council of Shopping Centers and Retailers. They may rise 45 percent by 2010, PricewaterhouseCoopers said last year.Migros Türk, which was founded in 1954 as a joint venture with Switzerland's Migros Cooperatives Association, currently has stores in Azerbaijan, Kazakhstan, Kyrgyzstan and Macedonia. Koc hired JPMorgan Chase & Co. last year to manage the sale, as it seeks to reduce debt after buying Turkey's state oil refiner in 2005. Merrill Lynch & Co. advised BC Partners.
