Romanian food service operator Sphera Franchise Group announced on October 9 it plans to launch an initial public offering (IPO) on the Bucharest Stock Exchange (BVB).

The IPO market for private companies in Romania recently revived, with the listing of Medlife in December 2016 followed by the considerably larger IPO of Digi Communications in May. 

The IPO will consist of shares representing approximately 25% of the total number of shares issued by Sphera Franchise Group which will be offered to retail and institutional investors in Romania and to international institutional investors, outside the US. The offering is expected to be completed in the fourth quarter of the year.

The company will not raise new capital in connection with the public offering and will not receive any of the proceeds, it said in a statement. This is not uncommon in Romania, where recent IPOs of private companies have represented a partial exit for investors rather than being used to fund further growth. 

WOOD & Company is acting as sole global coordinator and joint bookrunner in connection with the offering. Raiffeisen Bank (Romania) is acting as joint bookrunner and Alpha Finance Romania S.A. as co-lead manager in connection with the offering. Rothschild is acting as financial adviser to the company.

Sphera is a leading food service group in Romania, operating a portfolio of internationally brands: the KFC, Pizza Hut, Pizza Hut Delivery and Taco Bell franchises, as well as the KFC franchise in Moldova and in two regions in Northern Italy.

On the Romanian market, KFC ranks second in the quick service restaurants (QSR) segment, Pizza Hut Dine-In is the market leader in the full-service restaurants (FSR) segment and Pizza Hut Delivery ranks second in the delivery segment in terms of sales.

The group’s franchised foodservice business was launched in 1994, with the opening of the first Pizza Hut restaurant, which was followed by the opening in 1997 of the first KFC restaurant, both in Bucharest.

The company’s net profit increased 9.2% on the year to RON51.6mn last year. Since 2012, the group has expanded its restaurant network by 40 units, or by 63%, to a total of 104 as of September 30, comprising 67 KFC restaurants (63 restaurants located in Romania, two restaurants located in Moldova and two restaurants in Italy) and 37 Pizza Hut units (of which 16 are delivery units).

“We are encouraged by the market environment and anticipate that the positive macroeconomic and industry trends will continue in and beyond 2017,” Mark Hilton, Sphera CEO, said.

The Romanian foodservice sector is expected to grow at an average annual growth rate of 4.6% between 2017 and 2022 given the current under-penetration of foodservice units per capita and also due to the expected growth in disposable incomes.

Despite the recent series of IPOs, FTSE Russell retained Romania on its watch list as a frontier market, with the country to be reviewed for possible reclassification as a secondary emerging market in September 2018. The main sticking point for Romania in its quest to achieve emerging market status was the low level of liquidity on the market. It is not expected to boost liquidity sufficiently for an upgrade until the IPO of state controlled hydropower company Hidroelectrica, for which the timing is unclear.