Turkish private equity deals signal investment appetite after failed coup

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Taxim Capital, which is based in Jersey, bought a 40% stake in Big Chefs on September 7, said Kerim Kotan, managing director of Pragma, the investment bank that advised the Istanbul-based restaurant company on the sale. The agreement hasn’t yet been publicly disclosed, and Kotan declined to specify the value of the deal.

Meanwhile, leading Turkish ice-cream maker Mado is in advanced discussions with Bahrain-based Venture Capital Bank to sell a sizable minority stake, said Kotan, who is advising the Kahramanmaras-based deserts-and-food company.

Mado’s deal to sell slightly less than half of its family-owned shares may be valued at around $ 150 million, according to a person familiar with the negotiations.

Venture Capital Bank and Mado, which has 350 million lira ($ 118 million) in annual revenue and 330 shops, didn’t immediately respond to requests for comment.

Foreign investors have largely shunned Turkey since the failed coup, sending the benchmark BIST-100 Stock Index tumbling by some 8% and the lira to record lows. On September 23, Moody’s Investors Service cut the country’s credit rating to junk from investment grade, citing mounting economic threats.

“Moody’s expects growth will slow over the coming years, as constraints on the externally funded, consumption-fueled economy emerge, the reform agenda slows further and the investment climate remains weak,” the New York-based rating firm said.

But as Turkey’s government takes steps such as cheap credit to bolster the economy and the central bank in Ankara loosens its monetary policy to help stimulate growth, this key emerging market continues to pique the interest of global investors seeking to tap average gross domestic product growth of about 5% since 2002.

Managing partner Serkan Kizil said Taxim Capital, which received money from the World Bank’s International Finance Corp and the European Bank for Reconstruction and Development, completed its initial €105 million ($ 118 million) fundraising round shortly after the July 15 coup attempt and made its first investment in Big Chefs. He declined to say how much the firm had paid for the shares, but said Taxim Capital’s investment range is €10 million to €40 million.

“Big Chefs is in a very fast-growing sector, all-day casual dining, that can reach consumers across all categories,” Kizil said. “We see attractive investment prospects in Turkey… we’re telling investors that now is a good time to buy in.”

The restaurant chain, which has launched its international expansion in the United Arab Emirates and Saudi Arabia, is targeting more than 200 million lira in revenue this year and has seen its earnings before interest, taxes, depreciation and amortisation nearly double from 11 million lira in 2014 to an estimated 20 million lira in 2016, according to an investor presentation seen by The Wall Street Journal. Big Chefs is seeking to double its Ebitda by 2019.

A spokeswoman for Big Chefs confirmed the 2016 forecasts but declined to comment further.

Taxim Capital is working to complete a second deal this year and eyeing to expand its mostly European investor base to the Middle East and Asia as it seeks to boost its war-chest to €200 million for investment in Turkey.

This story was first published by The Wall Street Journal

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