Baring Central European Fund Closes

Baring Private Equity Partners has announced the first closing of its Baring Central European Fund at A75 million. The target is A150 million, which managing partner for the Central European Fund, Gyuri Karady, hopes to complete during the next nine months. Fund raising began in the first quarter of 1999 but says Karady; the distractions of fever removed attention away from more traditional sectors towards which the Central European Fund is targeted. Karady notes, however, that following the first closing, announced this week, and the disappearance of fever, interest in the fund is perking up. ING made an initial commitment to the fund of A25 million, with the remaining A50 million coming from the EIF and US institutional investors. Karady expects that the remaining A75 million to be raised will come from both US and European institutional investors.

Karady, a Hungarian national educated in the US, joined Baring in 1997 and has since that time been making seed investments across Europe. To date four investments have been made from the fund, although during the fund raising period those were financed by ING and bridge financing. Karady is well connected in the Hungarian market where he takes responsibility following on from over six years at the EDRB where he founded and ran their Hungarian investment team. Aside from Hungary, the Central European Fund partners, which aside from Karady are William Watson, Jacek Pogonowski and Leo Gherghina, work from offices in Poland (Warsaw), Romania (Bucharest), London and Hungary (Budapest), which is due to open in the first quarter of 2001. Pogonowski’s area is Poland and Gherghina’s is Romania. However, Karady is keen to point out that, while natural alignments exist within the team it is both fairly fluid and a genuine Central European partnership in that, unlike a number of other operators in the region, there is no command structure.

The four investments in the fund to date have been for around E10 million each and are geographically split. There is an investment in Polygrafia, Poland’s third largest heat set printer of magazines. This is a company that has all of its share capital listed on the Warsaw Stock Exchange. Baring Central European Fund has 75 per cent of the listed share capital having bought 85 per cent at the time of the offer. The remaining 10 per cent was sold back into the public market to local pension funds around the same time. Although it was not actually a public to private (PTP) transaction given that the Polish regulator asked Baring not to de-list the company. In any case with only 85 per cent acceptances it was not able to.

In Hungary the fund has invested in a security printer called Allami Printing Company. It specialises in excise stamps, election forms, lottery tickets and other important, non-bank note, printing. Baring’s investment provided the company the finances to enter into printing plastic identity cards and credit cards. In Romania Baring invested and is the largest shareholder in margarine, edible oils and ketchup company Topway Industries. Baring’s funds have been used as acquisition finance and to extend the product lines of Topway’s best known brands.

Finally, in Bulgaria the team has made an investment in Boyar, a leading Bulgarian winery and exporter, its main market being

the UK. Baring’s investment has enabled the construction of a modern winery based on Australian technology, which allows high production volumes while maintaining consistent quality.