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| VCP sells BC stake in top private equity deal |
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With a market value at the time of the transaction of €388 million, the sale by Vienna Capital Partners (VCP) of its 67.9% stake in Hungarian chemicals producer BorsodChem Rt was the largest private equity deal in the region to date. It took place in September of this year.
The transaction was coordinated and advised by HSBC Ltd., as global co-coordinator and book runner of the global offering, and CA IB as the Hungarian and Polish co-coordinator.
BorsodChem is the largest PVC manufacturer in Central and Eastern Europe, the region’s sole maker of MDI, and a leading regional producer of TDI. Since 2001, the company has stepped up its MDI and TDI production to lessen its exposure to changes in PVC prices.
Unaudited IFRS figures show that BorsodChem had consolidated net income of Ft 10.25 billion (€41 million) in the first half, compared to losses of Ft 782 million a year earlier.
VCP, a venture capital consultancy and advisory firm, set up in 1998 and run by renowned regional investor Heinrich Pecina, first bought into BorsodChem in 2001, when a takeover battle was underway on the Budapest Stock Exchange Rt (BÉT).
Pecina told the BBJ recently that the initial investment was based on the fact that he saw the PVC and MDI producer as a well-run firm with great potential.
“BorsodChem was a well-known firm before we invested. Looking more closely, I realized the company was very well managed, and interesting from a product and strategic point of view, and also [as regards] how the industry itself could develop in the region,” he said. “We are opportunity-driven, and at the time, chemicals was the most interesting industry in the area.”
Talking about the partial exit from the investment, Pecina explained that a combination of factors, including good timing concerning the health of regional chemicals, prompted VCP to sell its shares.
“But it was not a total exit. We remain the largest single shareholder. We created a situation that allows the company to grow,” he claimed. “If it needs more capital, it is much better known than before, it has a much stronger institutional shareholder base, its shares are now widely traded, and there’s a considerable free float. All in all, the situation is exactly what an equity investor is aiming at.”
Linked to the deal was the decision to seek a listing of BorsodChem shares on the Warsaw Stock Exchange (WSE). This was approved late September, a few days before the share sale close, which meant that Polish institutional investors could also take part in the offer. BorsodChem shares debuted on the open market on Oct. 8.
Commenting on the sale, the WSE listing, and future strategy, BorsodChem CEO László F. Kovács told the press in early October that the goal was to expand and remain independent.
“BorsodChem’s goal is to continue to expand capacity and strengthen its market position, taking further advantage of economies of scale, and to serve more effectively its growing target markets for isocyanates and PVC,” he said. “We are delighted that we will remain an independent integrated chemicals concern.”
Since the deal, BorsodChem has been constantly buying its own shares on the BÉT. Following the Dec. 13 purchase of a block of 60,337 shares at a price range between Ft 1,885 and Ft 1,900 per share, the company now holds 966,813 ordinary shares as treasury shares. The company stated in October that it will eventually buy back up to 2 million shares.
“The primary purpose of the treasury share purchase program is the short-term optimization of the company’s capital structure,” BorsodChem management wrote in a statement to the BÉT. “Beyond temporarily improving the capital structure of BorsodChem, the firm may use the shares as a basis for an employee share option program which is currently being constructed.”
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Source: Budapest Business Journal |
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© VCP AG 2010
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