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6 | ifr special report | May 2010 EQUITY CAPITAL MARKETS


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Turkey’s IPO market is either on the verge of a transformational new beginning or official efforts to help it come to life will founder on the rocks of global market volatility. There is no doubt that the official agencies are keen to get more companies listed.


One final sector that is garnering interest and which will see a number of deals before the end of the year is the Real Estate Investment Trust (REITS) market. Two REITS have applied for a listing so far this year: TSKB REIT applied in February while Idealist REIT applied in April. TSKB plans to raise TL50m through the sale of up to 57.5% of the company. Idealist has applied to sell 25% to raise a rather meagre TL2.5m. Other deals are understood to be in the pipeline.


from local bank funding to international credit to domestic equity. Aksa Energy and others are therefore seeking IPOs in order to be able to bid for the auctions of these assets. Indeed Aksa Energy was the winning bidder for two distribution grids sold by the government in February this year. Away from the energy sector, financial services will also play a role, although less in the pure IPO market and more in the secondary public offering (SPO market). Halk Bank is likely to have some form of public offering at some stage this year while fully state owned Ziraat Bank is also a listing candidate although most observers believe this will not happen until next year.


On the private equity side there is only one real IPO candidate of any note. Supermarket chain Migros was bought from Koc Holdings by BC Partners and Cinven in 2008 for US$3.15bn. The acquisition has been a success according to bankers close to the transaction and at some stage the private equity firms will be looking for an exit. But any decision on a possible IPO is understood to be at least a year away with a likely IPO at some stage after 2012.


This all means Turkey’s IPO market is either on the verge of a transformational new beginning or that official efforts to help it come to life will founder on the rocks of global market volatility. There is no doubt that the official agencies are keen to get more companies listed. At the IPO Summit, a panoply of the great and good from Turkey’s economic and financial polity all took turns extolling the need to expand the IPO market. Representatives from the Capital Markets Board of Turkey (CMB), the Union of Chambers and Commodity Exchanges of Turkey, and the Association of Capital Market Intermediary Institutions of Turkey, all gave their endorsement to the plans. Given the response of the delegates to the conference there is no shortage of potential listing candidates. However most of the companies that are planning on listing are too small to garner investor attention, especially interna- tional investor attention. And given that foreign investors already own 70% of the stocks listed on the ISE and that most IPOs revert to about 95% foreign ownership after three months of listing, the size of companies does matter. “If you look at ECM activity in Turkey, historically it has been relatively lumpy,” said Williams at Credit Suisse. “There are not that many deals above US$100m. Looking forward the potential privatisa- tion pipeline of jumbo deals is however substantial.”


The small deals that have applied for a listing include the TL8 million listing of 50% of Latek Logistic, a transportation company; the TL3.4 million listing of 33% of Mango Gida, a fresh produce company; and the TL26.4 million listing


of 33% of Ihlas Gazetesi, a newpaper and magazine publisher.


While these deals and this pipeline are important, they are not enough to be the catalyst that the market truly needs. That can only truly come when the large family companies decide to focus on a limited number of sectors and thus sell off companies in sectors they no longer want exposure to. There is very little sign of that happening.


“If you look at ECM activity in Turkey, historically it has been relatively lumpy. There are not that many deals above US$100m. Looking forward the potential privatisation pipeline of jumbo deals is however substantial.”


In the meantime, changes do need to be made to the listing rules which leave companies and their advisers wholly exposed to weeks if not months of market risk. Companies are obliged to say how many shares they are selling and the price range when they apply for a listing. It then takes usually at least two months before the actual sale goes through. In this time conditions change but the system is inflexible: if the size or price has to change, then documents need to be refilled. In the case of Koza Gold, the deal only managed to get through because the selling family actually bought 13% of the deal themselves. This situation perhaps best encapsulates the dilemma facing the IPO market: the families need to be willing sellers, but they are also the only buyers. For the market to really take off the local institutional investor base has to develop significantly (see box).


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