Scimitar Gets Hefty Cut In Romanian Exit

Romania does not hold a candle to China or India when it comes to enthusiasm among private equity investors. But the former Communist country is part of a growing Eastern European bloc of nations that is gaining momentum as the European Union grows and becomes more economically uniform. Scimitar Global Ventures, which has offices in Stamford, Conn., Dubai and Geneva, capitalized on this trend early and recently made its first successful exit in Romania, Buyouts has learned.

The private equity firm disclosed that the sale of outdoor advertising company Monopoly Media has yielded a net return of 60 percent. The firm would not provide any financial specifics regarding its initial purchase price or the recent sale price, and would not disclose the buyer except to say that it is a very large Romanian media company.

Monopoly Media installs flat screen television panels in banks and shopping centers and uses the medium to sell and distribute advertising. While this model has been in use in the United States and Western Europe for some time, it has only recently gained traction in Eastern Europe.

Scimitar had a 40% stake in the company after providing it with its initial funding about one year ago. The company was founded by Romanian entrepreneur Gabriel Faslei, who remains with the company.

According to Scimitar Partner Scott Ogur, the exit serves notice for private equity firms that may be too timid to dive into emerging markets. “This was our first exit within the emerging markets,” said Ogur. “It shows that it’s not just the Polands and Hungarys of the world, but that the second and third-round entrants of the EU are ready for foreign investments.”

Ogur said that Scimitar was approached earlier this year by two of Romania’s large media companies and eventually entered into exclusive negotiations with one of them. He noted that negotiating the deal proved challenging at times. “There was a certain mindset hurdle on the part of the buyers. We had to get them to overcome the fact that we as financial investors were going to receive a nice return… and make them understand that we took a lot of risk so that the return was fair.” He also said that Scimitar took pains to make sure that the entrepreneur, Faslei, would be well taken care of after the sale. Faslei now works for the company and its new owners under a management contract.

Scimitar was founded in 2003 and is headed by banking veterans of New York-based JP Morgan Private Bank. It makes later stage venture and small buyout investments in financial services, energy, security and industrial companies in Eastern Europe, the Middle East and North Africa. Within those regions, Scimitar has honed its focus on Romania in Eastern Europe, Northern Iraq in the Middle East and the Northern African nations of Morocco, Algeria and Tunisia.

This sprawling focus, however, could change. While Scimitar had initially started the year planning on raising a $50 million fund based on its current strategy (see Buyouts, Jan. 23, 2006), Ogur says that the firm is considering possible alterations based on what it is hearing from current and potential limited partners. Ogur said that the details are still being worked out, but noted that Scimitar may narrow its geographic focus as it raises its debut fund and could target a single country or region. Scimitar has so far funded all of its transactions, including its investment in Monopoly Media, with its limited partners on a deal-by-deal basis. Kabir Arghandiwal, who joined Scimitar from Morgan Stanley and is based in Dubai; Peter Tarazi, who managed private banking for the Middle East and Africa for JP Morgan and is based in Geneva and Zachary Venegas—M.S.