Listings continue low-key revival in CEE

In mid-June, it emerged that Turkish private equity house Turkven would list the Eurasian branch of Domino's Pizza in an offering worth up to £331m. DP Eurasia, which owns and controls Domino's Pizza outlets in Russia, Turkey, Georgia and Azerbaijan, eventually floated on the London Stock Exchange on 28 June with a market cap of £291m.

DP Eurasia has around 500 stores in Turkey and 70 in Russia, and employs 7,500 people. Domino's Pizza Turkey, the oldest of the Eurasian franchises, set up its first outlet in 1996. The company is mostly owned by Fides Food Systems, owned by Turkven's 2007 fund Turkish Private Equity Fund II. It obtained the franchise rights to Domino's Pizza in Turkey in 2010, before acquiring the rights in Russia in 2013, and adding Azerbaijan and Georgia in 2014.

The price range for the offer was set at 200-230 pence per share, implying a market capitalisation of between £291-331m. DP Eurasia eventually priced its IPO at the bottom of that range, with shares opening at 200 pence on 28 June.

However, even with the lower target compared to the initial price range, investors seemed reluctant on the stock. Share price promptly dropped by 20% on the first day of trading to settle on 161 pence. It has since recovered somewhat, closing on 190 pence at the time of writing, with a market cap of £284m.

Meanwhile, private-equity-backed Hungarian trucking company Waberer's International set its IPO price range at €16.50-20.37 in late June. The company's activities cover long-haul international transport of standard pallet goods, storage and distribution of dry and refrigerated goods, domestic transport, and international brokerage. In 2016, the firm generated €572.2m in revenues and €69.2m in EBITDA, with 6,500 staff on payroll. CEE-focused buyout investor Mid Europa acquired the company in 2011, initially taking a 49.5% stake, which it later increased to 97.1%.

Eventually, Waberer's priced its IPO at HUF 5,100 (€16.51) per share on 3 July – again at the bottom end of the initial €16.50-20.37 range, and resulting in a €300m market cap. The business raised €50m in fresh capital, which will allow it to bolt on Link Services, a Polish freight transportation firm.

While the market debut of both Waberer's and DP Eurasia failed to set the world alight, there are a number of noteworthy takeaways. The first, and more obvious, is that the IPO has made something of a comeback as an exit route for GPs in the CEE region. As unquote" noted back in March, IPO volume for PE-backed, CEE-based assets has slowed to a trickle since 2013, when the region hit a post-crisis peak of six flotations, down from an all-time high of nine in 2006. In 2016, unquote" recorded just a single listing. With the IPOs of DP Eurasia and Waberer's coming to fruition, the region has already gone some way to working towards that 2013 high-water mark.

Dino effect
The expectation that the listing of Dino Polska earlier this year would see other PE-backed assets following suit was also vindicated, even if the other contenders could not quite match the supermarket chain's performance. The $420m IPO of Dino in April saw demand exceed supply by a reported 75%, and share price has steadily risen since. The company's market cap is now nearly a quarter higher than it was at listing.

Furthermore, the flotation of DP Eurasia in particular could be a bellwether of investor appetite for CEE assets listed on foreign exchanges – traditionally, the bulk of IPOs for CEE assets have taken place on local exchanges. The picture is of course nuanced from that perspective, since DP Eurasia did not generate appetite in the way that Dino did. Most notably, the IPO failed to capitalise on the fact that the share price for other listed Domino's franchise businesses, in the UK and Australia for instance, has risen dramatically in recent years, which could have further enticed punters. Regardless, DP Eurasia did list successfully and, if early days are to go by, the company's share price could improve sufficiently for Turkven to benefit when it sells the remainder of its holding.

Finally, Waberer's, despite hitting a market cap at the bottom end of its initial ambitions, still scored the largest IPO recorded in Hungary since 1998, drawing more eyes on local PE-backed assets in the process.

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• Topics
• CEE
• Exits
• IPO
• Mid Europa Partners
• Turkven Private Equity