Unquote

Enterprise Investors makes 7x on €533m Profi exit to Mid Europa

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Poland-based GP Enterprise Investors has made 7x money on its €533m sale of Romanian supermarket chain Profi Rom Food to Mid Europa Partners.

A source close to the transaction confirmed to unquote" that Enterprise had made a return of around 7x its original investment, which gives Profi a total equity value of €533m. The Profi SBO is the largest ever buyout in Romania, according to unquote" data – more than twice the size of any previous deal in the country. Enterprise said in a statement the sale is the most successful retail sector transaction in the firm's history.

Mid Europa's 2014-vintage €800m Mid Europa Fund IV vehicle provided equity in the transaction, alongside the GP's €650m dedicated LP co-investment programme, partner Nikolaus Bethlen told unquote".

The exit is the result of a structured process launched by Enterprise in May 2016, when it engaged Citi Corporate and Investment Banking to explore options for an exit of the Romanian supermarket group.

The auction process saw significant interest from both private equity and strategic buyers, according to a source involved in the process. Among the names reportedly bidding for Profi were KKR, BC Partners and Pamplona. Mid Europa's Bethlen said that, in general, CEE dealflow is strong and he is seeing the largest appetite for mid- and large-cap assets in CEE in 15 years.

Bethlen said Mid Europa had been following Profi for a number of years before it came up for sale, and believes the good relationship with management and knowledge of the company his firm had built up was a beneficial factor in Mid Europa's successful bid.

Looking ahead, the GP plans to focus on expanding Profi's operations in Romania, which it expects to be the key driver of value for the company. Factors such as Romania's GDP growth rate, which is among the highest in Europe, and Romania's ongoing transition into a modern trading economy are among the factors Bethlen believes will underpin continued growth in the company, especially as the population's disposable income rises. He said the GP would consider add-on acquisitions of some smaller complementary businesses in Romania, but that the main focus will be opening new locations of Profi's three shop concepts.

Including the initial acquisition of Profi in 2009 through EI's 2006-vintage €658m Polish Enterprise Fund VI, Enterprise has invested €76m during its time holding 100% of the shares in the company.

In a statement, Enterprise claimed Profi had seen EBITDA growth of more than 30% each year between 2010-2016, provided the company hits its projected revenues of €800m this year.

For Mid Europa, the acquisition of Profi marks the second major CEE deal completed by the GP in just over a month, having taken a stake in Polish online marketplace Allegro through a $3.253bn consortium buyout alongside Cinven and Permira in October. The private equity firm is currently investing from its 2014-vintage Mid Europa Fund IV, an €800m vehicle.

The transaction is expected to close in Q1 2017, subject to anti-trust approvals.

Debt
 Mid Europa's Bethlen said the deal was supported by a €225m all-senior debt facility, arranged by a club consisting of Citi, ING, Unicredit and Raiffeisen.

Previous funding
Tapping its Polish Enterprise Fund VI, Enterprise first acquired Profi in 2009, as part of a management buy-in that saw it wholly acquire the company in a €66m EV transaction. Two years later, the GP injected an additional €10m into the business.

Company
Headquartered in Timisoara, Profi is a Romanian supermarket chain.

The group operates three shop concepts: two focused on urban areas and one focused on rural parts of Romania. Enterprise and Mid Europa said in a statement that Profi is expected to make €800m in turnover in the 2016 financial year, up from €150m when it was acquired in 2009, according to unquote" data.

The business employs a staff of 11,000 across nearly 500 shops in 250 Romanian cities.

People
Enterprise Investors – Sebastian Król (partner).
Mid Europa Partners – Nikolaus Bethlen (partner); Robert Knorr (co-managing partner).
Profi – Daniel Cirstea (CEO).

Advisers
Vendor – Citi Global Markets (corporate finance); RTPR Allen & Overy (legal); PwC (financial due diligence, tax); AT Kearney (commercial due diligence).
Equity – EY (financial due diligence); Beragua (commercial due diligence); Dechert (legal); Bondoc & Asociatii (legal).

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