Failure in grid sale a lesson for firms

Turkey plans to privatize toll roads including two bridges over Istanbul’s Bosphorus. Privatizations dominate M&As in Turkey. Hürriyet photo

Unsuccessful experiences in Turkey’s privatization procedures are a good lesson for investors to learn not only how to make a deal, but also be able to keep and finalize it, according to a top representative of Koç Holding.

“It is important to know how to get a deal done, but [knowing how not to] destroy it is as crucial,” Murad Ardaç, Koç Holding’s Strategic Planning Coordinator, said yesterday in a panel discussion at the Turkish Merger and Acquisitions and Private Equity Forum organized by mergermarket.com in Istanbul.

Six such deals were privatizations with a total value of $12 billion, he said, and “Only two of these deals – with the lowest value from all six – were completed. Thus, 84 percent of the total value of the six deals remained either pending, waiting for second or third rounds, or were totally cancelled, he said Before the deals, expectations regarding Turkey’s privatization deals were high, but the opposite turned out to be true, Ardaç said.

Ardaç said the time to approve deals was too long. “It takes one to three years to get an approval by the State Council [for a privatization deal], during which many things might change,” he said.

Turkey’s bids to privatize electricity distribution grids nationwide have been largely unsuccessful, with best bidders being unable to find financing for completing the privatization process. The Privatization Administration announced on Oct. 31 that Boğaziçi Elektrik (BEDAŞ), the company who won the tender for electricity distribution in Istanbul, failed to make due payments on time. Aksa Elektrik, the company that offered the second best bid, also announced it had decided not to pay additional temporary collateral of $55 million to extend the payment deadline.

IC-İçtaş, the firm that offered the second best bid for Trakya Elektrik, the electricity distributor in the Thrace region, was the only company to pay additional collateral of $11.5 million to extend its final payment for two more months by 5 p.m. on Oct. 31, the deadline for the payments.

Meanwhile, MMEKA, a joint venture between Mehmet Emin Karamehmet and Mehmet Kazancı that was the top bidder for the electric distribution grids in Istanbul worth $4.8 billion, also failed to make the final payments for the takeover by Oct. 31.

MMEKA had also failed to finalize the privatization of Başkent Doğalgaz, Anakra’s gas grid.

Leather giant looks to expand abroad

Local leather producer Derimod is opening a store in Arbil, Iraq, a debut investment to be followed by new stores in Iran, Russia and the Balkans, according to a top executive.

“We aim to transform Derimod into an internationally recognized brand,” Derimod Chairman Ümit Zaim said, daily Hürriyet reported yesterday. “Our goal is to make Derimod one of Turkey’s top 10 internationally recognized labels,” Zaim said, adding that they did not plan to open Derimod stores in a casual, unplanned fashion.

“Instead, we want to do this with international partners.” he said