Turkey's Frigo Pak Becomes PE Target

So while international investors have been happy to invest in food retailing in Turkey, they have tended to leave manufacturing to the locals. Until now.

Frigo Pak, an Istanbul-listed family-owned fruit juice and soft drink maker, last week agreed to sell at 29 per cent stake to New York based private equity investor, Universe Capital Partners.

Haydar Guclu, founder and Chairman of Frigo Pak, said the decision to sell was an easy one.

“We managed 59 per cent growth last year and 50 per cent during the first half of this year and we couldn’t see ourselves improving on that in the current climate ,” he said, explaining that the company exports around 85 per cent of its production, making it less exposed to the fluctuations of the domestic market.

Targeting exports to markets across the EU, North America and the far east has helped reduce spread risks during the past few years of global economic crisis.

“If you are a reliable supplier as we are, and you have good quality products, you can always find a market irrespective of which economies are growing or not,” he said, pointing out that Frigo Pak’s exposure to individual markets is small.

Erdogan Cetin, managing partner at Universal, the capital increase involved may be small – it will see Universal invest a minimum of TL10m ($5.5m) this year – but it will enable FrigoPak to invest in new plant and machinery needed to target new markets.

“Food is a core commodity and the food sector is one of our top priorities. The opportunities for food manufacturing in Turkey are huge,” he said, adding that Universal was actively looking for other food sector companies to invest in.

“For the time being we’re looking at Turkey but if the right opportunities come along we could look at other emerging markets, for example India,” he said.

Given the nature of Turkey’s food manufacturing sector, Universal has no shortage of candidates to look at.

“Most Turkish food companies are family owned and would most likely be eager to sell if the pricing is attractive enough,” said Melda Agirdas, food and retail sector analyst at Istanbul brokerage Ekspres Invest.

But Agirdas warns that, given the cyclical nature of the Turkish food sector, investors must be in for the long haul – and, given that most Turkish food sector companies get less than 15 per cent of their revenues from exports, they will need the nous to help develop new export markets.

She points to the purchase last year by Abu Dhabi investment group Aabar Investments of a 16 per cent stake in Banvit, Turkey’s leading poultry producer, at a 25 per cent premium as indicating both confidence in the Turkish domestic market and a willingness to help develop new markets in the Gulf. (FT Times)