David O'Byrne in Istanbul -
Turkey's Anadolu Endustri Holding, whose owners control Turkey's biggest brewer, Anadolu Efes, has finalised an agreement to buy a 40.25% stake in the country's second biggest supermarket operator, Migros Ticaret, a move which analysts concur has as much to do with Turkey's increasingly stringent restrictions on the sale and marketing of alcoholic drinks as it does with the country's fast growing supermarket sector.
Anadolu Endustri will pay Migros' current majority owners, international private equity group BC partners, TL26 per share, a premium of 36% on the share price on October 2 when talks between the two started, valuing the company at around 6.4 billion liras (€2.3 billion).
With 19.5% of Migros stock traded on the Istanbul Stock Exchange (BIST), this leaves BC also holding a 40.25% stake through it's affiliate Moonlight Capital, making it equal partners with Anadolu. In a statement the two companies confirmed that they plan to run Migros in partnership.
Given Turkey's fast growing population, retail and in particular food retail has become an increasingly attractive investment. With a total retail area of 1.6 million square meters spread over 1,196 stores in four domestic formats, Migros is Turkey's second largest retail group, responsible for 15.5% of Turkey's food retail sector, while its 890 flagship Migros stores, are the country's largest non-discount supermarket chain.
However, buying into the group makes sound commercial sense for Anadolu Endustri on more than one level, explains Irem Okutgen, food and beverage analyst at Istanbul brokerage Garanti Yatirim.
She points to Anadolu Endustri's other business interests and those of the group's owners, the family holding companies of Turkey's Yazici and Ozilhan business dynasties, which between them own 43% of Anadolu Efes - Turkey's biggest brewer, as well as a leading brewer in the CIS region, the fifth biggest in Europe and the tenth biggest globally.
With over 70% of the Turkish beer market, largely through its flagship Efes Pilsen brand, Anadolu Efes has been particularly vulnerable to the policies of Turkey's ruling Justice and Development Party which over the past few years has abandoned its previous laissez faire pluralist policies in favour of its own brand of increasingly authoritarian Islamic nationalism.
The past two years seen the introduction of a blanket ban on sponsorship by alcohol producers, with Anadolu Efes forced to change the name of its basketball team - Turkey's most successful - from Efes Pilsen to Anadolu Efes, and to abandon its Efes Pilsen music festival after 23 years.
At the same time all forms of alcohol advertising have been outlawed, including even the display of alcohol brand names on store fronts, and retail sales of alcohol have been prohibited after 10pm - a move which has particularly affected small local stores, with many being forced to close.
Less obvious and less advertised has been the effect on alcohol sales of changes in Turkey's organised retail sector, which is increasingly dominated by conservative family-owned companies which disapprove of alcohol on religious grounds. In the past four years two of the country's biggest supermarket chains which stocked alcohol, Sok and Dia, were bought up by Turkey's Ulker group, which removed the alcohol from the shelves.
"Most of the big supermarket chains in Turkey are owned by conservative groups and don't sell alcoholic drinks," explains Okutgen, pointing out that Anadolu's interest in Migros stems not only from the need to secure its own retail outlet chain, but also from the wish to prevent the main non-discount supermarket chain being bought up by a group which would refuse to stock its products.
"If Migros was bought by a group which didn't want the chain to sell alcohol that would been a major blow for Anadolu Efes," says Okutgen, adding that by buying into Migros, Anadolu has in effect secured itself a sales outlet for its brewing affiliate.
All eyes on Tesco
With the ownership of Migros now secured, attention has turned to the future of UK retail giant Tesco's lossmaking Turkish subsidiary Tesco Kipa.
The company was confirmed as being in talks with both BC partners and Anadolu Endustri over a possible sale or a three-way merger of Tesco Kipa early last year, long before the company announced its unprecedented 90% profits slump for the first half of 2014.
Those talks were later abandoned, raising questions as to what Tesco plans to do with its 191-store Turkish chain, other than continue with its existing programme of closing lossmaking stores, and whether other buyers may be looking at the chain.
"We know Tesco has been evaluating merger opportunities, looking to benefit from the know-how of local partners and possible synergies," says Okutgen. "But they may also be considering exiting the Turkish market completely or delisting from the BIST," she says, pointing out that the company's free float is only 4.5%
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