Clare Nuttall in Bucharest -
After taking over Serbia-based Danube Foods Group, owner of several of the former Yugoslavia’s best known food and drink brands, private equity firm Mid Europa Partners is looking to grow the group within the region, according to Andrej Babache, the Mid Europa director who led the deal.
In April Mid Europa completed the transaction to take a controlling interest in Danube Foods (and its associated Clates Holding BV), which with revenues of more than €400mn in 2014 makes it the largest branded fast moving consumer goods (FMCG) platform in the former Yugoslavia. The deal gave the business an enterprise value of just under €600mn.
Danube Food’s subsidiaries include Imlek and Mlekara Subotica, which together form the region’s largest dairy business, as well as Serbia’s largest confectioner Bambi, and the country’s top producer of mineral water and other non-alcoholic beverages, Knjaz Miloš. “What makes these companies tick is their strong brands. People have grown up with these brands, which are some of the most iconic in the region. In a UK context, these would be the equivalent of what, say, a Cadbury's is in chocolate," Babache says in an interview with bne IntelliNews.
The history of the deal goes back several years. Mid Europa has been active in Serbia and other former Yugoslavian markets since 2007, when it acquired Serbian cable television and broadband company SBB, during which time it was “difficult not to notice Danube Foods Group”.
However, according to Babache, the deal was more complex than most, and Mid Europa was previously just one among several would-be investors to make failed attempts to buy some or all of the susbidiaries that form Danube Foods. The firm finally struck a deal to acquire the group, announcing the deal in February. The European Bank for Reconstruction and Development (EBRD) supported the deal with a €60mn subordinated loan and a €20mn equity investment. White & Case acted as legal adviser and UniCredit as financial adviser on the deal.
As required by law, Mid Europa then offered minority shareholders in the two listed companies, Imlek and Bambi, the chance to sell their shares via the public market at the acquisition price. There was a strong take-up of the offer, which will give Mid Europa close to full control of the companies. “We believe in the brands, but we think more can be done,” Babache says. “We are keen to invest and to grow the businesses when opportunities present themselves, whether through acquisitions or organic growth.”
Greater than the sum of its parts
Babache draws a parallel with SBB, Mid Europa’s other major investment in the former Yugoslavia. Two years after the initial transaction, the firm bought Telemach, a provider of cable-based triple-play services in Slovenia and Bosnia & Herzegovina, merging it with SBB in 2012. The combined business was sold to firms controlled by US-based private equity investor KKR in 2014. “With SBB, we bought a business that was the market leader in the cable television market in their home country, and in five years turned it into the market leader in five countries across the region,” says Babache. “We think there is a substantial opportunity to do the same thing with Danube Foods.”
Expanding SBB across a region with numerous different languages and subtle cultural differences was not straightforward. Babache notes that the television and entertainment sector is driven by language, taste and culture, but that potential obstacles were overcome in SBB’s case by the company’s strategy and strong management. “We understand that the region is composed of relatively small countries that have shared a long history, but which have sometimes subtle differences in language, taste and culture,” he says
This has to be taken into account when transporting brands that have been successful in one country across borders, as Mid Europa did with SBB and plans to do with Danube Foods. “Some brands translate better than others – the key is selecting the right ones,” he notes.
While Southeast Europe is part of Mid Europa’s investment region, the majority of the firm’s investments – with exceptions such as Croatian cement producer Calucem and MobiFon in Romania – so far have been in Central Europe and the Baltic states. “Southeast Europe is a core part of our region, but it’s important to invest into the right assets in the right geographies,” Babache says. “We think we have the right assets here and would love to do more in this region.”
Clare Nuttall in Bucharest - Macedonia’s EU accession progress remains stalled amid the country’s worst political crisis in 14 years, while most countries in the Southeast Europe region have ... more
bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more
bne IntelliNews - Leaders of EU member states and Southeast European countries on the main ... more