HSBC Enables Turkish Godiva Owner Closing In on Top Deal

By Ercan Ersoy

The buyer of United Biscuits Holdings Ltd. is getting help from HSBC Holdings Plc (HSBA) as the Turkish company seeks to fund the nation’s biggest foreign acquisition.
Yildiz Holding AS plans to borrow 900 million pounds ($1.4 billion) to fund the purchase, a person with direct knowledge of the deal said Nov. 4. That would be the biggest loan taken out by a Turkish company to finance the takeover of an asset abroad, according to data compiled by Bloomberg.
The owner of the Godiva chocolate brand will use part of the loan to refinance United Biscuits’ debt of about 600 million pounds, the person said. Istanbul-based Yildiz, which also has investments in finance, will pay close to 2.1 billion pounds to buy the U.K.-based biscuit company from Blackstone Group LP (BX) and PAI Partners SAS, the person said, asking not to be
identified because the information is confidential.
“This acquisition is a great step for Yildiz Holding to go international in branding after the earlier purchase of chocolate maker Godiva,” said Yarkin Cebeci, an economist at JPMorgan Chase & Co. (JPM) in Istanbul.
HSBC is arranging the loan as a non-recourse all-senior facility, another person said. Bob Baker, a London-based spokesman for HSBC, declined to comment, as did a spokesman for Yildiz.

Ebitda Multiple

The acquisition payment will be made by Nov. 14, Yildiz Holding Chairman Murat Ulker said at a Nov. 4 press conference. Yildiz will use debt for 40 percent of the price, while the remainder will come from its own funds, he said.
“A borrowing of 40 percent of the acquisition price is not very aggressive, but not very conservative either,” said Julien Martin, a London-based investment manager at Aberdeen Asset Management Plc. The acquisition price implies a ratio of United Biscuits’ enterprise value, or market value plus debt, to earnings before interest, taxes, depreciation and amortization, or Ebitda, of 10 to 11, he said.
Yildiz Holding, which has its own Turkish cookie business, will operate in 100 countries after the acquisition, Ulker said. The company plans to grow in Latin America and Russia, two big markets where Ulker and United Biscuits products aren’t yet sold, he said.
Yildiz was advised by HSBC Holdings Plc and Istanbul-based Unlu & Co. in the transaction while Deloitte LLP advised on due diligence and tax matters. Goldman Sachs Group Inc. and JPMorgan Chase & Co. assisted Blackstone and PAI Partners, according to an e-mailed statement from the sellers.

Current Account

Prior to United Biscuits, the largest foreign acquisition by a Turkish company was the $1.45 billion purchase of a 10 percent stake in the Caspian Shah Deniz gas project by Turkiye Petrolleri AO, a state oil company, from Total SA. (FP)
The United Biscuits purchase will cause a foreign direct investment outflow of about $1.8 billion and increase Turkish companies’ external debt, said Ozgur Altug, chief economist at BGC Partners in Istanbul.
“I am proud of this transaction as a Turkish citizen,” Altug said by phone. “Sentimentally, the deal is positive for Turkey, but mathematically it will deteriorate some of Turkey’s macro ratios.”
According to the International Monetary Fund’s accounting for balance of payments, the $1.4 billion financing through foreign banks will be recorded as an increase in the country’s foreign debt stock, Altug said.

‘Deteriorating Finance’

Turkey had $8.64 billion of FDI inflows in the first eight months of this year, $773 million more than the figure a year ago, while FDI outflows amounted to $4.05 billion, more than double the previous year, according to the central bank’s website.
Financing quality of Turkey’s current account deficit is deteriorating, Moody’s Investors Service senior analyst Alpona Banerji said at a conference in Istanbul yesterday. FDI inflows are covering 28 percent of the gap this year while the coverage was 50 percent in 2010, she said. The gap narrowed 35 percent to $29.6 billion through August this year, according to data compiled by Bloomberg.
The money leaving Turkey will return in the long run as the investments make profits, improving the balance of payments, said Bora Tamer Yilmaz, an economist at Ziraat Yatirim in Istanbul.
“If investors can find profitable assets abroad, that will be good for Turkey’s fight with the current account deficit in the long run,” Yilmaz said. “One of the vulnerabilities in Turkey’s economy is the external balance.”
(A previous version of this story was corrected to amend the company name.)