Wal-Mart, the world's largest retailer, is reportedly set to make a non-binding offer to acquire a controlling stake in Turkish supermarket giant Migros Ticaret imminently.
A permanent fixture lurking in the shadows in large emerging markets, Wal-Mart has so far enjoyed little success in entering the CEE market. Now, the UK's Daily Telegraph reports unnamed sources in London's financial sector as saying that the US giant has been in protracted on-off talks to buy UK private equity firm BC Partners' 80% stake in Migros for several months.
Bankers from JP Morgan are advising BC Partners on the potential deal, while Barclays is working with Wal-Mart, the paper notes, adding that any deal would be worth over €1.2bn. As one of Turkey's major supermarkets, a deal for Migros would hand Wal-Mart exposure to a fast growing emerging market with increasingly wealthy consumers.
Although Wal-Mart has yet to submit a formal offer for Migros, sources claim the US company is expected to make a non-binding offer imminently so that it can get access to the supermarket chain's books. It is then expected to make a binding offer in the first quarter of 2013.
A takeover of Migros, as part of an anticipated merry-go-round in the Turkish retail sector, is widely expected by the market. Last week, Tesco's Turkish division denied it is in talks to buy the company. French retail giant Carrefour has also been tipped as a potential purchaser. The world's second largest retailer is struggling to overcome a deeply seated row with Sabanci, its local partner in Carrefour SA. In September, Carrefour was reported to be looking at merging its Turkish business with Migros.
BC Partners bought a 51% stake in Migros in 2008, in Turkey's biggest ever private equity takeover, which valued the country's biggest supermarket group at €2bn ($2.6bn), including debt, according to Migros' website. It later increased its holding to close to 100% by buying out minority shareholders, before putting around 20% back onto the public markets. Both BC and Wal-Mart refused to comment on the report.
Analysts at Erste Bank anticipate BC Partners is almost certain to strike a deal with someone in the near future. "We believe that the main shareholder BC Partners is likely to exit from Migros in 2013e at the latest and that such a deal could result in an attractive tender offer opportunity for minorities," they write in a note. "Thus, even though this news could be a repetition of what we already know, it could be positive for Migros' share performance. We calculate a 15% IRR in USD terms for BC Partners for its Migros investment, based on the latest closing price."
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