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15 яну 2017, 21:34, 1863 прочитания

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This article is part of K Quarterly # Issue 1 / November-January 2017. Contact us for subscription options on kq@economedia.bg

Finance/ Latvia-based 4finance Holding Acquires TBI BankOleg Boyko, another Russian billionaire, enters the Bulgarian market. 4finance Holding, one of the big players in the fast customer credit business with presence in 15 countries, acquired TBIF, the financial unit of Dutch-Israeli group Kardan. TBIF includes Bulgarian TBI bank, the leasing companies TBI Rent in Bulgaria and TBI Leasing IFN in Romania, as well as Romanian fast-credit company TBI Credit IFN. The combined assets of TBIF in the two countries total 272 mln. euro. The acquisition price was 69 mln euro.
TBI bank is one of the smallest credit institutions in Bulgaria with assets of 255 mln euro but according to Capital’s TOP 10 Banks ranking, it is number one in terms of efficiency and profitability. Luxembourg-registered 4finance Holding is headquartered in Latvia. The company is owned by Russian billionaire Oleg Boyko. He made his fortune running slot machine halls and now his SMS Finance operates a network of ATMs for fast credits.


Manufacturing/ KJK Capital invests €7 million in Leader 96The Finnish fund acquires 60% of the growing Bulgarian bicycle manufacturer. Finland’s KJK Capital Fund has acquired 60% of Bulgarian bicycle manufacturer Leader 96 by investing nearly €7 million in the Plovdiv-based factory. The rest of the capital is owned by the company founders.
Leader 96’s sales more than doubled over the past two years, reaching 63.5 million levs (€32.5 mln.) in 2015, as demand for bicycles increased. Earlier this year, the company opened a new factory, doubling its annual capacity to over 500,000 units. KJK Capital provides financial services and manages assets worth €450 million. It has already made several minority equity investments in Bulgaria.
Bicycle production is one of the few fast-growing industries in Bulgaria. The country ranks fifth in Europe with 940,000 bicycles manufactured in 2015. Leader 96 is the first Bulgarian company in the sector to attract a foreign investor.

Agriculture/ Agria Group acquires sunflower oil producer KehlibarFactory’s former owner buys 10% in agricultural holding. Bulgaria’s Agria Group Holding has acquired 100% of local sunflower oil producer Kehlibar from the sole owner, Svetlomir Todorov. The price of the deal is 14.8 million levs (€7.6 mln.). In a parallel transaction,Mr Todorov has acquired 9.75% of the holding company for 6.8 million levs (€3.5 mln).
Kehlibar, based in the town of Lyaskovets, is one of the largest sunflower oil producers in Bulgaria with capacity of more than 50,000 tonnes per year. In 2015 its sales increased by more than a fifth to 41 million levs (€20.1 mln) and its profit doubled to 3.5 million levs.
Agria Group is among the largest agricultural holding companies in Bulgaria with some 20,000 ha of arable land owned or leased. It has been growing actively through acquisitions. The Kehlibar transaction is considered strategically important, as it gives Agria Group an entry into a new sector.

Insurance/ Bulstrad acquires UBB-AIG for €3.2 millionThe former competitor remains independent, renamed to Nova Ins. Bulstrad Vienna Insurance Group has acquired for €3.2 million its smaller rival UBB-AIG Insurance Company, which is specialized in loan related insurance. UBB-AIG will continue operating independently under a new name, Nova Ins, and in close partnership with United Bulgarian Bank (UBB), one of the former owners. The deal included UBB-AIG’s assets worth 8.5 million levs (4.346 mln. euro) and liabilities of 805,000 levs. No further restructuring of the company is envisaged. The new owner will continue to develop it as a bank assurance sales channel. UBB-AIG is the smallest insurance company on the Bulgarian market with a share of about 0.3% as of November 2015. Its business depends mainly on customers provided by UBB.
Bulstrad in turn is leader with 12.6% of the market. The group also has a life insurance business, Bulstrad Life Vienna Insurance Group.



Retail/ Piccadilly remains with one owner after partners withdrawNikolay Lazarov to look for new co-investor in troubled retailer. Two of the owners of Bulgarian retail chain Piccadilly have quit the company and it is now solely owned by Nikolay Lazarov. The withdrawal of the Popov brothers, comes after two years of partnership with Mr Lazarov. During this time the chain shrank and stopped paying regularly to suppliers. Mr Lazarov, who lives in Paris, will be looking for a new co-investor. Last autumn Piccadilly’s business was moved to Select Trade, a company owned by Luxembourg-registered BK Finance, which is connected with Mr Lazarov. The company posted more than 41 million levs revenue and 786,000 levs profit for 2015. Piccadilly’s turnover decreased 20% to 159 million levs last year and the company booked a loss of 31.6 million levs. In May 2015 the company borrowed 11.8 million from Investbank, paid some of its debt to suppliers and unveiled a plan to recover the business.
Solar power / Renewables undergo consolidation. The renewables business in Bulgaria, which until recently had a pretty much scattered ownership, is undergoing slow consolidation. In less than six months energy trader Energy TM acquired Zhrebchevo HPP in partnership with Nikolay Valkanov, owner of Minstroy Holding, and now it buys the local subsidiary of US-based SunEdison which owns 20 MW photovoltaic installations. The price was not announced, but it is probably in the range of 33-35 mln euro. At the beginning of the year China’s ReneSola sold its 10 MW photovoltaic park to Luxembourg-based Solar World Invest Fund SIF. The fund is looking for new deals in Bulgaria.

Packaging/ Portuguese BA Vidro acquires Druzhba Glassworks. The second largest glass manufacturer in Bulgaria, Druzhba Glassworks, now part of Greek group Yioula, will be acquired by Portugal’s BA Vidro. The intention of Yioula to sell parts of its business has been known for more than a year, because the family owned group has substantial debts and seeks restructuring. Druzba Glassworks had a turnover of over 220 mln levs in 2015 and is the second largest in the sector after Turkish SiseCam in Targovishte. It is a big producer of bottles and jars for canning, wine and beer industry, with 70% of its production exported to Greece, Italy and Serbia. The company has two production units - in Sofia and Plovdiv. Druzhba Glassworks is one of the largest companies on the stock exchange in Bulgaria. Its market capitalization is 235 mln levs, but the company is one of the least liquid. Shares outside its core Greek owner were only 0.76%, according to its financial statement for 2015.

Market/ Commodity exchanges in Sofia and Ruse merge. The Sofia Commodity Exchange and the Bulgarian Commodity Exchange (based in Ruse) signed a memorandum to merge. The deal, which is expected to be finalized by the beginning of next year, will practically consolidate the whole commodity trading business in one place. The annual turnover of the new exchange will amount to 600 mln. levs (307 mln euro). The Ministry of Finance decided several months ago to cut the number of goods which public institutions and state-owned companies can buy from the commodity exchanges. The ministry motivated its decision with the widespread suspicion that the exchanges are used to bypass the open tender procedure and to manipulate prices.

International Investors Buy Three IT Businesses
Bulgarian tech companies start to appear regularly on global M&A map.
Following the successful and widely acclaimed $263 mln acquisition of Bulgarian software company Telerik by the US-ba sed Progress Software in 2014, now it seems that the Bulgarian IT industry has started to provide such M&A success stories on a regular basis. In the last couple of months three companies found new foreign owners, though the investment was significantly lower.
UK-based market research agency Future Thinking acquired GemSeek Consulting, a Bulgarian data science and analytics market research business for an undisclosed price. The two companies had been working together for almost a year prior to the deal. GemSeek Consulting saw remarkable growth in recent years. Between 2013 and 2014 its revenue more than tripled and reached 3 mln euro. In 2014, GemSeek was distinguished as the most dynamic among small and mid-size companies in the IT sector in the Capital Gepard annual ranking.
Bulgarian network services provider and IX operator OM-NIX was bought by Australian network interconnection company Megaport, which also said it signed a purchase agreement for the second largest internet exchange in Germany, Peering. The combined acquisition cost was 3.1 mln euro,
Software firm Ideagen bought its Bulgarian re-seller Logen, expanding is direct client base in Eastern Europe. Logen provided the UK company’s specialized audit, resource and risk management product to clients such as the Bulgarian National Revenue Agency, the Croatian Tax Administration and the Czech National Bank.

Peevski buys his printing house back cheaply
The deal exemplifies the ease with which public sales can be manipulated
A company associated with Delyan Peevski, a MP from the Movement for Rights and Freedoms considered one of the so called oligarchs in Bulgaria, has acquired in a public auction the land plot and the buildings of IPK Rodina 1 in Sofia, the country’s biggest and most modern printing house. As expected, there was no bidding since the buildings can hardly be used for other purposes. The equipment, which is prohibitively expensive to be moved out, is being sold in a different auction, making the whole procedure highly suspicious.
The sale price for Pechatnica Sofia, located near Sofia airport, is 4.4 million levs (2.25 mln euro), nearly one-seventh of the value of the credit from Corporate Commercial Bank (CCB) used to build it.
The printing complex was built in 2012. The CCB financed the whole project with loans in excess of 80 mln levs (41 mln.euro). The printing house was built by a company related to Mr Peevski and his former business partner Tsvetan Vassilev, the owner of CCB, but it has never worked. Following the break-up of Mr Peevski and Mr Vassilev, the printing house was transferred under the control of the latter, because the whole company was set as loan collateral in CCB. Now the receivers of the failed CCB are looking to recover the credits and are selling the printing house.
The price could have been even lower. The asking price in the first auction was set at only 2.3 mln levs, but the sale failed, because the minimum price, according to the obligatory tax valuation, should have been 4 mln. levs.
As a result now A.E. Best Success Services Bulgaria EOOD buys Pechatnica Sofia for a fraction of its real price. It is strange that the buyer did not seek permission for concentration from the competition authority, because it owns the biggest operating printing house in Bulgaria which prints almost all national newspapers. One possible explanation could be that Peevski plans to close down the existing facility and to transfer all its operations to his newly and cheaply acquired printing house.
The ultimate losers are the taxpayers who funded the repayment of the debts of bankrupt CCB.

Bulgarian arms exports grow by 59% in 2015
Half of the 642.5 mln euro exports went to the Middle East
Bulgaria exported weapons and ammunition worth 642.5 mln euro in 2015, according to the annual report of the Interdepartmental Commission on Export Control (ICEC) with the Ministry of Economy. This is a 59% increase in comparison with the previous year. In 2014, Bulgarian arms exports were worth 403 mln euro.
ICEC issued 697 permits for export and transfer totaling 1.402 billion euro in 2015, which is an indication that exports will continue to grow in 2016.
Capital K100 annual ranking showed that in 2015 some arms exporters were among the most profitable companies in Bulgaria.
Traditionally, Bulgaria has exported military hardware mainly to conflict points in Africa and the Middle East. It is noteworthy that Ukraine became a serious market for Bulgarian weapons. In 2014 arms exports were worth less than a million euro, but the Bulgarian authorities issued export certificates for 39 mln euro.
Iraq remains the main client of Bulgarian arms companies. Baghdad purchased arms worth 159.6 mln euro in 2015, twice as much in comparison with 2014. The second biggest customer was Saudi Arabia, which bought weapons for 92.4 mln euro. Israel, Qatar and the United Arab Emirates were also big buyers of Bulgarian arms. Afghanistan was the fourth biggest destination for Bulgarian arms exports with purchases of 57.4 mln euro in 2015, up from 42.7 mln euro in 2014.

Bulgartabac’s domestic market share shrinks
The former state monopoly controls just below 30% of the Bulgarian cigarette market
The domestic market share of Bulgartabac, the tobacco company related to Delyan Peevski, fell to 29.5% in August, according to data from cigarette companies. In recent years Bulgartabac was able to keep its market share above 30% and now, for the first time, that share is lower. The other company that lost market share is KT International (formerly Kings Tobacco, owned by the Peshtera Winery shareholders). Its share is down by 1.2pp. Two foreign companies - Philip Morris and British American Tobacco, increased their market share
Even though the drop in sales is not significant, it is a bad omen for Bulgartabac, because the company had to slash its exports. Bulgartabac ceased exports to the Middle East, which represented over 80% of its sales. The reason was a determined action by the Turkish authorities to fight illegal sales. In 2014, 50% of the cigarettes smuggled into Turkey originated from Bulgartabac. Last year, their share fell to 45% of illegal sales but Bulgarian cigarettes remain the most popular contraband brand in Turkey.
Bulgartabac’s woes are probably the source of the rumors that Mr Peevski plans to sell the tobacco company. Besides three cigarette factories, Bulgartabac controls cigarette distributor ELD as well as Lafka, a network of newspaper and cigarette kiosks. Peevski hid his ownership of Bulgartabac behind a Dubai-based company at the beginning of the year following his problems with the Turkish authorities.
In the meantime, the tobacco market is growing, while the smuggling of cigarettes – an endemic problem for Bulgaria until recently, almost disappeared. The latest study on the consumption of cigarettes without excise label shows a record decrease for the last ten years. Now, only 8.1% of the cigarettes sold in Bulgaria are smuggled cigarettes. Decreased smuggling, increased excise duties and a rise in consumption contributed nearly 200 million levs (102 mln euro) more in excise tax revenue in the nine months of the year in comparison with the same period in 2015.
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