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Sponsors shop local as Turkish banks support Migros Turk buyout

A consortium of BC Partners and minority investors Turkven Private Equity and DeA Capital have agreed a US$1.64bn deal to buy Koc Holding‘s 50.8% stake in Migros Turk, Turkey’s largest supermarket chain. The deal is funded equally between debt and equity with Turkish banks Garanti Bank, Is Bank and Vakifbank providing the financing.

Sponsors are increasingly turning to domestic lenders as investment banks and global commercial banks struggle to support leveraged buyout.

Turkish banks in particular have liquidity and have a reputation for supporting domestic borrowers. Sponsors can negotiate with such banks with a higher degree of confidence that a deal can be delivered, in contrast to the situation with international bankers hamstrung by nervous credit committees.

Domestic lenders are also more likely to offer attractive pricing in the current market. As mainly take-and-hold lenders they are under less pressure to price with syndication in mind.

Indeed, the deal brings together key private equity trends for the year ahead: sponsors seeking value in a growth opportunity in a high growth economy and relying on local market liquidity to provide debt for lower leveraged deals.

The deal values the entire business at US$3.25bn and will be followed by a tender offer for the rest of the shares in the Istanbul-listed retailer. Migros has a 22% market share. Bulend Ozaydinli former CEO of Koc Holding, Turkey’s largest conglomerate, will become chairman of the group.

The deal is a record breaking deal for the Turkish market, which has only seen leveraged buyout activity since acquisition finance became available in 2004.

The deal followed an auction by Koc Holding which is exiting its non-strategic businesses. The auction attracted bids from trade buyers French retail giant Carrefour and local partner Sabanci, German trade bidder Aldi and from private equity firm KKR partnered with Croatian foods group Agrokor and from private equity firm Bain.