A buyout group of Cinven, Permira and Mid Europa Partners were confirmed on October 14 as the winners of a bidding contest to acquire the Polish online auction site Allegro from South African owner Naspers, in a deal which came at more than $1bn above expectations of around $2.2bn, making it this year’s biggest private equity deal in Central and Eastern Europe.
The group saw off competition from Advent International in tandem with investment fund Hellman & Friedman, Apax with CPP Investment Board, and CVC Capital Partners with General Atlantic.
Allegro was highly regarded as an acquisition opportunity given its double-digit growth, already high market share and profitability, and relatively high (at least in emerging market terms) market penetration. “Operationally, Naspers’ Allegro business continues to compare favourably with its larger US peer (eBay), with underlying growth accelerating into low double digits in ,” wrote analysts Credit Suisse ahead of the deal.
As such, observers were not too surprised that the deal came in above the $2.2bn valuation that Naspers had placed on it in September, though the final price of $3.253bn was considerably higher. Naspers acquired Allegro in 2008 for $1.485bn. Naspers’ shares closed the day up 5% in Johannesburg trading.
If completed, the deal will be one of the five largest acquisitions of a Polish asset ever, according to data compiled by Bloomberg, and the largest private equity deal this year in the CEE region. According to industry observers, although still at relatively modest levels, private equity investments in CEE look to be back to levels last seen in 2009. A report issued in August by Invest Europe (the new name for the European Venture Capital Association) and law firm Gide Loyrette Nouel said that buyout investments increased by 36% to €1.3bn in 2015, representing 78% of all investments. Poland accounted for 54% of that total, boosted by CVC’s acquisition of PKP Energetkya.
That appears to have continued into 2016, with Poland the most active region in terms of investments in the first quarter, accounting for eight deals, or 35% of all deals worth a total of $425mn in the region.
Permira said this is its first investment in Poland and was attracted by the high growth in the Polish e-commerce market as well as the fact it is still in an early stage in terms of e-commerce penetration, so strong growth opportunities lie ahead. Poland's e-commerce market is expected to grow by 15% in 2016 to PLN36bn and to PLN63bn by 2020, according to Sociomantic Labs.
Regarding Allegro, the UK-based private equity firm noted that it is Poland’s number-one internet brand with more than 20mn registered users and the most popular e-commerce destination with more than a 40% share of total e-commerce transactions.
“The Permira Funds have been backing internet leaders for many years. In Allegro we have found a real gem which is the pre-eminent consumer and merchant internet brand in Poland. The business has a fantastic underlying technology platform and we look forward to backing the management team to develop it further. We believe Allegro is ideally positioned to capture the next wave of growth in online and mobile commerce,” said Richard Sanders, a partner at Permira.
Advisors to Cinven, Permira and Mid Europa on the transaction included: Goldman Sachs International (lead financial advisor), Macquarie (financial), Clifford Chance (legal), McKinsey (commercial) and EY (accounting and tax), while the seller was advised by Morgan Stanley (financial advisor), Allen & Overy (legal) and Deloitte (accounting and tax).