In a situation when the economic downturn is drying out Bulgaria’s economy, every deal is a sensation. Such is the case with market leader Devin water bottling company, which is about to change its majority owner, Austria’s Soravia Group.

This was confirmed to Kapital weekly by Martin Ohneberg, executive director  of Soravia Group, which holds 75.3 per cent in Devin through Devin Beteiligung.

A Kapital source, however, claims that more than 80 per cent of the company has been put up for sale, which includes the company managers’ shares as well.

Taking control over a market leader, with a rich product portfolio, modernised production units and nation-wide distribution network, is an attractive bite for every investor who has the money to do so. Moreover, the price such a deal would have, in times of crisis, will be lower than it would have been in "normal times", hence the strong interest in Devin among candidate buyers.

"It is a big company, a market leader. A lot of people would have an interest in buying it," says Valeri Petrov, a partner in Bancroft Private Equity fund.

‘It’s decided. We’re selling’
Soravia bought its stake in Devin in 2006. Three years later, it first started thinking of selling, but the Austrian company only launched its search for a buyer in the spring of 2009.
"It is clear that the real estate market in Central and Eastern Europe is facing difficulties and since this market is our core business, we decided to get rid of any side investments such as our ownership in Devin. It has nothing to do with Devin itself, which is developing very successfully," Ohneberg said. In this respect, Soravia has no plans to sell one of its biggest real estate projects in Bulgaria, the Megapark business centre which is currently under construction on Sofia’s Tsarigradsko Chaussee Boulevard.

Devin is not the only investment from which Soravia wants to withdraw. At the end of April 2009, the company sold its 44 per cent in the TownTown construction project, Wirtschaftsblatt said.

Weeks ago, Soravia sent out letters of invitation to potential buyers of Devin and, according to private equity funds, there is no shortage of candidates.

According to DealWatch, who were the first to announce the Devin deal, interest in the bottling company has been shown by Argus Capital, Balkan Accession Fund and Societe Generale’s asset management fund SGAM.

According to speculation in Bulgaria, GED and Bancroft Private Equity have also shown interest.

GED told Kapital that the fund was looking for attractive investment opportunities and was currently working on 20 projects but because of confidentiality agreements that it had signed, it could not say anything more on the issue. Bancroft also declined to comment.  

In expectation
Potential buyers in Devin were expected to file their preliminary bids within a few days. Based on these bids, Devin’s owners will decide with whom they want to continue holding negotiations. The final bids are expected to be filed within a month, after selected bidders carry out legal and financial analysis of Devin.

According to consultants, two years ago companies were sold at a multiplier of between eight and 12 times their earnings before interest, taxes, depreciation, and amortisation (EBITDA). Now, however, deals are being done at a multiplier of four to five times the EBITDA and the descending trend is showing no sign of abating. That would put Devin’s selling price at no less than 25 million leva, given that its EBITDA was 6.7 million leva in 2008.

Other industry sources point at market capitalisation before the imminent sale was announced as a possible valuation indicator. At the end of May, before the reports of Devin’s impending sale, the company was valued at 47.8 million leva. It has now increased to 53.5 million leva.
 
Kapital weekly, issue 22