Turkey Retail Sector Update 2012


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Turkey Retail Sector Update 2012

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Turkey Retail Sector Update 2012

  1. 1. Retail Sector Update Corporate Finance June 2012
  2. 2. 1 2011-2012 Transaction highlights Deloitte Turkey Corporate Finance (DTCF) assumed various financial advisory roles in recent M&A transactions in the retail sector in Turkey. DTCF advised clients on the sell-side and buy-side both in M&A Advisory and Due Diligence Services as well as in valuation and market analyses. Selected engagements are listed below: Turkey Vendor due diligence services to a leading shoe retailing and manufacturing group Turkey Sale advisory to a footwear retail company On-going Turkey Sale advisory to an apparel On-going retail and manufacturing company Turkey Lead financial advisor to Silk & Cashmere In its sale to Eastgate Capital Group Turkey Vendor due diligence services to YKM Turkey Acquisition advisory to a Gulf based group regarding its proposed acquisition of a local department store chain Discontinued Turkey Acquisition advisory to a Gulf based group regarding its proposed acquisition of a local women’s apparel and footwear retail group On-going Turkey Review of the retail operations of Café Crown Regarding a joint -venture establishment with Caribou Coffee Turkey Due diligence services to Naspers Regarding the acquisition of Markafoni Turkey Due diligence services to a foreign retail chain regarding its proposed acquisition of Praktiker Turkey Vendor due diligence services to a Turkish hosiery products manufacturer and retailer Turkey Due diligence services to 212 Capital Partners Regarding the acquisition of balerin.com
  3. 3. 2 Industry trends Macroeconomic Performance According to the official figures, Turkey is the 18th largest economy in the world with a GDP of US$772 billion in 2011. Due to the fragile global economic environment as well as the need to reduce the current account deficit, the Turkish economy is expected to make a soft-landing in 2012 and to regain momentum in the following years in a more sustainable manner. The economy, which grew 8.9% in real terms last year, is expected to grow by 3.5% in 2012. Industry Commentary The Turkish retail market is continuing its sustainable growth in line with increasing purchasing power per capita and the development of modern and organized retailing. The per capita private consumption of US$7,350 in 2011 is expected to exceed US$10,000 by 2015. Strong economic performance supported by a young population stimulates growth in spending per capita. As a consequence of the strong demand from Turkish consumers, retail investments have been experiencing great momentum in recent years. Thanks to a number of fueling factors, Turkey became one of the most popular destinations for foreign investors including private equity firms, global supermarket chains, fashion retailers and several other retail concepts. A: Actual, F: Forecast Source: EIU, Turkstat 648 732 615 735 772 778 886 1,006 1,122 1,224 4.7% 1.1% (-4.7)% 8.9% 8.5% 3.5%4.0% 5.2% 5.3% 5.1% -8% -4% 0% 4% 8% 12% 0 200 400 600 800 1,000 1,200 1,400 US$million Macroeconomic Performance GDP (US$ bn) at Current Prices Real GDP Growth (%) 6,480 7,090 6,040 7,140 7,3507,640 8,470 9,330 10,210 10,990 0 2,000 4,000 6,000 8,000 10,000 12,000 US$ Private Consumption per Capita CAGR (2012-2016) = 9.5%
  4. 4. 3 The total size of the retail sector (organized and unorganized) in Turkey is expected to reach US$313 billion in 2012 and grow with c.10% CAGR until 2016. Organized retail, a highly promising segment due to increasing per capita consumer spending and relatively weaker presence up to now in comparison with developed markets, is estimated to be c.40% of the total retail industry in Turkey. Limited total surface rent area, compared to robust consumer demand and rapid urbanization, triggered large scale retail investments across the country. The number of shopping malls in Turkey increased by more than 20% in the last two years and reached c.300 at the end of 2011. In the same period, the total surface rent area in Turkey increased by more than 30% and reached c.7.3 million m2 . Category Commentary Food and Beverage Food and beverage, which has the largest share (c.52%) in the Turkish retail sector as of 2011, is expected to grow at c.9% CAGR in the next five years and reach US$233 billion in 2016. Home Retail The home retail market in Turkey, comprised of household furniture and textile products, reached c.US$48 billion in 2011. The market is expected to grow CAGR c.10% in the next 5 years and reach c.US$70 billion in 2016. Apparel Retail Starting from 2012, apparel sales in Turkey are expected to grow CAGR c.12% and reach c.US$41 billion in 2016. Consumer Electronics Consumer electronics, having c.4% share in the Turkish retail sector, are expected to grow by c.65% in the next 5 years. Consumer electronics spending per capita is also expected to increase by more than 50% in the same period. Internet Retail According to the Interbank Card Centre, the total value of e-commerce transactions was US$13.6 billion in 2011 which is 50% higher than in 2010. Out of this US$13.6 billion, the consumer goods internet retail market(*) amounted to c.US$1.3 billion and is expected to grow with a CAGR of c.12% between 2012-2016, reaching c.US$2.3 billion. * Excluding C2C sites, sales of automotive products, tickets for events and travel, gambling, quick delivery of food, magazines, household goods, etc. Food 52% Non-Food 48% Food vs. Non-Food Organized 40% Market Structure Source: EIU Unorganized 60% 143 155 133 156 158 164 185 202 217 233 121 133 115 139 144 149 170 187 204 224 0 100 200 300 400 500 US$billion Retail Sales in Turkey Food Non-FoodSource: EIU 264 288 248 295 302 313 355 389 421 457 CAGR: 3.4% CAGR: 9.9%
  5. 5. 4 Industry focus: internet retailing in Turkey Internet Penetration Internet penetration in Turkey has more than doubled in the last 5 years and reached 45% in 2011. Mainly driven by the young population and increasing income level, internet penetration is also positively affected by discounted prices and expanded coverage. Turkstat’s household information technology usage survey, conducted between January-March 2011, reveals that 47% of internet users in Turkey used the internet to find information on goods and services whereas 7% purchased goods during the period. Internet Retail Still in its infancy, the internet retail sector in Turkey is growing at a remarkable pace through a number of brand new initiatives and strong demand from online consumers. Data maintained by the Interbank Card Center, the Turkish clearinghouse for bank cards, shows that e-commerce transactions (including non-retail) through virtual point of sales (VPOS) grew with a CAGR of 60% in the past seven years and reached c.23 billion TL in 2011. According to e-commerce intelligence source Internet Retailer, two Turkish companies appear in the Top 150 internet retailing websites of Europe. Hepsiburada.com (ranked 89th), a group company of Doğan Holding operating as a mass merchant, was the leading internet retailer in Turkey in 2011 with c. US$190 million revenue followed by Markafoni (ranked 143rd), a pioneer online apparel retailer, with a revenue of c.US$95 million. Online apparel shopping clubs offering products at discounted prices and deal-of-the-day websites are popular destinations among Turkish internet users. Increasing consumption through online media shows that security concerns are not a headwind for Turkish consumers as they were in the past. According to the Interbank Card Center, there are nearly 7,400 ‘‘3D Secure’’ registered virtual shops in Turkey as of 2011. Increasing activity of private equity investors and venture capitalists with a focus on e-commerce is becoming a dominant trend in the sector. 1,388 2,412 5,537 9,089 10,274 15,225 22,874 0 5,000 10,000 15,000 20,000 25,000 2005 2006 2007 2008 2009 2010 2011 millionTL E-Commerce Transactions Through VPOS* * Virtual Point of Sale Source: The Interbank Card Center 30% 36% 38% 42% 45% 0% 10% 20% 30% 40% 50% 2007 2008 2009 2010 2011 Internet Penetration in Turkey Source: Turkstat
  6. 6. 5 M&A snapshot M&A Activity in Turkish Retail Sector M&A activity in the Turkish retail sector had shown a fluctuating trend in recent years when compared to the global marketplace. However, by comprising 4.3% of the total M&A deal value, the Turkish retail sector proved its potential in a year like 2011 where private sector activity was dominant. There were 11 transactions(*) in the retail sector in 2011, with an estimated deal value of c.US$640 million. In the last five years, 37 retail deals have been generated with an estimated value of US$4.5 billion. In the first quarter of 2012, the Turkish retail sector saw profound activity through 5 deals(*). Highlighted Transactions February 2012 - Boyner, the leading department store chain in Turkey has announced that it signed agreements to acquire a 63% stake in its major competitor YKM for a consideration of US$108 million. December, 2011 - East Gate Capital Group, Dubai based private equity and real estate investment subsidiary of NCB Capital, made its first investment in Turkey and acquired a 49.8% stake in Fabeks, owner of the Silk & Cashmere brand, which is one of the leading cashmere brands globally, for an undisclosed sum. June, 2011 - Gözde Girişim Sermayesi, private equity investment arm of Yıldız Holding, acquired 99.6% of Şok Marketler from Migros for a consideration of US$380 million. May, 2011 - Kuwaiti investment company Global Investment House acquired a stake in Yargıcı, Turkish retailer of women’s apparel and accessories, for an undisclosed sum. 3,799 2,936 2,073 2,434 2,564 138 59 41 49 77 3.6% 2.0% 2.0% 2.0% 3.0% 0% 1% 2% 3% 4% 0 1,000 2,000 3,000 4,000 2007 2008 2009 2010 2011 US$billion Global M&A Activity Total Deal Value Retail Deal Value Source: Mergermarket, Thomson Reuters 19.3 16.2 5.2 29 15 0.3 3.3 0.1 0.2 0.61.6% 20.4% 1.9% 0.7% 4.3% 0% 5% 10% 15% 20% 25% 0 5 10 15 20 25 30 35 2007 2008 2009 2010 2011 US$billion M&A Activity in Turkey Total Deal Value Retail Deal Value Source: Mergermarket, Dealwatch, Deloitte Data * Excluding internet retailing transactions.
  7. 7. 6 M&A Activity in the Turkish Internet Retailing Sector Thanks to rapidly growing internet penetration and an increasing number of online merchants, the internet retailing sector in Turkey has been experiencing a boom. In order to benefit from the high growth potential of the sector, local and foreign investors are showing great interest in established internet brands as well as to promising initiatives being brought to light by local entrepreneurs. The Turkish internet retailing sector hosted a record level of activity with a total of 20 transactions since the first transaction in 2010. Apparel discount shopping club websites being in the first place, deal-of-the-day websites and online apparel retailers attracted most of the attention during the period. M&A activity in the Turkish internet retailing sector reached its historical peak in 2011 with a total of 12 transactions. The first quarter of 2012 which saw 7 deals also signals a strong trend in terms of M&A activity. The statistics for M&A activity for 2011-1Q12 period are presented below: Highlighted Transactions March 2012 - Markafoni, backed by Naspers, acquired 75% of Doğuş Holding’s En-moda, an apparel discount shopping club website which became operational in June 2011. December, 2011 - E-commerce giant Amazon made its first investment in Turkey by acquiring 19% of Çiçeksepeti, Turkey’s leading online flower and gift retailer. August, 2011 - USA-based private equity houses Tiger Global Management and Kleiner Perkins Caufield & Byers acquired a total of 37% shareholding in Trendyol, leading Turkish apparel discount shopping club website. Prior to this transaction, in January 2011, Tiger Global Management had acquired a 20% stake in the same company. May, 2011 - South African multinational media company Naspers acquired 68% of Markafoni, one of the pioneer apparel discount shopping club websites of Turkey for a consideration of US$86 million. April, 2011 - eBay announced its acquisition of an 83% shareholding in the Turkish consumer-to- consumer website Gittigidiyor for US$217 million. Prior to the transaction, eBay was holding a minority stake in the company. Type of Investor Investor Origin Transactions by Business Area
  8. 8. 7 Transactions in the Turkish internet retail sector # Acquirer Origin Target 1 212 Capital Partners Turkey Butigo.com 2 212 Capital Partners Turkey Balerin.com 3 Etohum Yatırım Turkey Biacayip.com 4 Tiger Global Management USA Sporcum.com 5 Private Investors Turkey e-bebek.com 6 Doğan Online Turkey Evmanya.com 7 Markafoni.com Turkey En-Moda.com 8 Amazon USA Ciceksepeti.com 9 Tiger Global Management USA Trendyol.com 10 iLab Ventures Turkey Unnado.com 11 Bilyoner Interaktif Hizmetleri Turkey Bombastik.com (Former Grupca) 12 Hummingbird Ventures Belgium Ciceksepeti.com 13 eBay USA GittiGidiyor.com 14 iLab Ventures Turkey Cimri.com 15 Naspers Netherlands Markafoni.com 16 ePlanet Capital USA Vipdukkan.com 17 Intel Capital USA Grupanya.com 18 Tiger Global Management; Kleiner Perkins Caufield & Byers USA Trendyol.com 19 Quants Holding Switzerland Grupfoni.com 20 Tiger Global Management USA Trendyol.com Source: Deloitte Annual M&A Reviews 2011 1Q12 2010 Area of Business Stake Deal Value (US$ million) Shoe Retailing N/D N/D Cosmetics Retailing N/D N/D Lifestyle Products and Gifts N/D N/D Sportswear Retailing 68.3% N/D Infant & Baby Products Retailing 50.4% N/D Furniture and Home Products Retailing 100.0% N/D Apparel Discount Shopping Club 75.0% N/D Online Flower and Gift Store 18.7% N/D Apparel Discount Shopping Club 20.1% N/D Apparel Discount Shopping Club 33.0% N/D Deal-of-the-Day Website 30.0% N/D Online Flower and Gift Store N/D N/D C2C Online Auction and Shopping 83.0% 217.0 Electronics Retailing 100.0% N/D Apparel Discount Shopping Club 68.0% 86.0 Apparel Discount Shopping Club 28.2% 5.0 Deal-of-the-Day Website N/D N/D Apparel Discount Shopping Club 36.7% N/D Deal-of-the-Day Website N/D N/D Apparel Discount Shopping Club N/D N/D
  9. 9. 8 US$ million Market Cap as of 25 May 2012 Enterprise Value (EV) EV/Sales EV/EBITDA Global Apparel Retail GAP 13,336 13,063 0.9x 6.4x Hermes 33,861 35,109 9.4x 26.9x Macy's 15,565 20,526 0.8x 5.8x Turkish Apparel Retail Altınyıldız 610 884 2.4x 11.1x Boyner 152 205 0.5x 6.3x Vakko 117 150 1.1x 9.7x Global Food Retail Carrefour 12,200 28,287 0.3x 10.0x Metro 9,274 15,023 0.2x 3.8x Tesco 38,955 53,750 0.5x 6.5x Wal-Mart 222,098 253,123 0.6x 7.3x Turkish Food Retail CarrefourSA 938 958 0.7x 83.6x Kiler 228 378 0.8x 12.1x Migros 1,497 2,587 0.8x 11.7x Tesco Kipa 479 819 0.7x 11.5x Source: Capital IQ, Public Disclosure Platform P/E 17.4x 47.2x 12.2x 32.2x 11.7x 27.7x n/a 11.9x 8.7x 13.0x n/a n/a 89.2x 99.8x Market snapshot
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  11. 11. 10 Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world- class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s approximately 182,000 professionals are committed to becoming the standard of excellence. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. ©2012 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited For more information about M&A Advisory Services contact: Başak Vardar Partner bvardar@deloitte.com + 90 (212) 366 63 71 DRT Kurumsal Finans Danışmanlık Hizmetleri A.Ş. Sun Plaza Maslak Mah. Bilim Sok. No:5 34398 Şişli, İstanbul Tel: 90 (212) 366 60 00 Fax: 90 (212) 366 60 30 Armada İş Merkezi A Blok Kat:7 No:8 06510, Söğütözü, Ankara Tel: 90 (312) 295 47 00 Fax: 90 (312) 295 47 47 Punta Plaza 1456 Sok. No:10/1 Kat:12 Daire: 14 – 15Alsancak, İzmir Tel: 90 (232) 464 70 64 Fax: 90 (232) 464 71 94 Zeno Center İş Merkezi Odunluk Mah. Kale Cad. No: 10 b Nilüfer, Bursa Tel: +90 (224) 324 25 00 www.deloitte.com.tr