The Greek gateway

International private equity investors are increasingly looking to make acquisitions in Greece, not just for its above average GDP growth of 3.6% in the first quarter compared to the rest of Europe, but also because local companies have significant exposure to the robust developing markets of South Eastern Europe.

The most recent private equity investment was the Carlyle Group’s acquisition of a stake in chemical company Neochimiki, in a deal which values the company at €749m. Notably Neochimiki has been aggressively expanding its chemicals distribution and production business into the Balkan region. A consortium of Greek and international financial institutions will provide financing for the buyout. The US headquartered private equity group, according to its Athens Stock Exchange announcements, has already acquired more than 90% via its unit Green Bidco, allowing it under Greek law to squeeze out minorities and eventually de-list the company.

Carlyle’s managing director, Robert Eastern, said: “This is our first investment in a Greek company and reflects our confidence in the country’s strong economic growth prospects as well as Greece’s position as a gateway to investment in Eastern Europe.”


Ernst & Young Athens transaction partner, George Momferratos, who has a depth of experience in local private equity deals, said: “Many Greek companies have invested in South East Europe, which provided the natural geography for expansion after the opening of these economies. These economies have a larger growth potential and established EU players, like Greek companies, provide an ideal platform for their further expansion. This is an attractive angle for both strategic and PE investors”.

The credit crunch has restricted financing and made it even more expensive for large leveraged buyouts, so transaction values have dropped and smaller deals are of more interest in these leaner times.

“Smaller emerging markets are therefore bound to attract more private equity interest and Greek companies with significant South East Europe operations are likely to benefit,” Momferratos underlined.

In Greece, large private equity transactions started in 2005 with the €1.3bn buyout of mobile operator TIM Hellas by Apax Partners and TPG. The same joint venture was also involved in a smaller deal, like the acquisition of alternative mobile company Q-Telecom which was valued at €325m. BC Partners also entered the fray with their acquisition of locally listed casino group Regency Entertainment for €700m.

Since then Marfin Investment Group (MIG) has turned the temperature up on local buyouts. Home grown MIG, whose cornerstone shareholder is Dubai Financial, describes itself as an investment holding company, but has some common features with private equity firms. It amassed €5.2bn in a historical capital raising and since then has been relentlessly on the acquisition trail, although it has slowed down recently as it waits for more clarity on international asset values.

MIG made 12 acquisitions in 150 working days, the most notable being their purchase via on the Athens bourse of just less than 20% of local telecom incumbent Hellenic Telecoms Organization (OTE) for around €2bn. It was only after the state, OTE’s largest shareholder, introduced legislation to stop their stake building that they entered into an agreement to sell the stake to Deutsche Telekom AG for €2.5bn, booking a net profit estimated at about €144m. They are also present in food and catering after having bought leading local conglomerate Vivartia, and they are a powerhouse in regional passenger shipping through their acquisition of Blue Star Ferries and Attica Group. MIG also has significant interests in real estate, IT, hospitality and health services with exposure across the Mediterranean and South East Europe.

Cool reception

Despite that, sentiment for MIG stock has been frosty as investors try to digest its overriding philosophy, and because valuations, including locally listed companies it controls, have been falling. Its stock price is languishing close to €6 per share, which is a discount to net asset value of €6.4 per share for the end of the first quarter. Some senior local brokers say MIG’s share price is a barometer of how the market expects the Athens general index to perform in future.

The past in terms of private equity investment in Greece is a good guide to the future. Ernst & Young believe that the local sectors that will continue to attract interest from international players are “consumer goods, telecoms, financial services, tourism and real estate”.

As locally fostered buyouts gather momentum again in the second half of the year, international payers continue to eye selective Greek targets that offer them exposure to a region of healthier growth in affordable mid sized and small deals for tried and tested sectors.