Winds of consolidation at Borsa Istanbul strengthen with Sisecam Group merger

Winds of consolidation at Borsa Istanbul strengthen with Sisecam Group merger
In 1935, the Pasabahce Glass Plant began production with a workforce of 400.
By Akin Nazli in Belgrade February 4, 2020

Turkey’s leading glassmaking group Sisecam (SISE) is merging its Borsa Istanbul-listed subsidiaries Soda Sanayi (SODA), Anadolu Cam (ANACM), Trakya Cam (TRKCM) and Denizli Cam (DENCM) and non-listed Pasabahce, according to stock exchange filings made by the listed companies.

Sisecam CFO Gorkem Elverici on January 31 held a conference call on the merger decision. He informed investors that Sisecam’s Ebitda would increase by 200-300bp over the medium term thanks to cost savings generated by the merger. The group’s dividend policy would not change, according to Elverici.

In May 2019, Sisecam Group companies distributed dividends from their 2018 profits. Sisecam distributed Turkish lira (TRY) 400mn in gross dividends from its TRY2.33bn net profit made in 2018, suggesting a 3.3% dividend yield. The company’s average dividend yield stood at 2.1% for the nine years between 2010-2018.

Anadolu Cam distributed TRY90mn of its TRY451mn 2018 profit at a dividend yield of 4.2% and 1.7% for 2010-2018 while Soda distributed TRY345mn of TRY1.56bn at a yield of 4.7%. Trakya distributed TRY170mn of TRY958mn at a yield of 4.6% and 2.4% for 2010-2018.

Julian Rimmer at Investec said in a note to investors: “The combined entity will have ballpark mkt cap $3bn, making it among top fifteen Turkish stocks by mkt cap, its ebitda margins will rise 200-330bp on synergies/cost savings blah blah blah, it will have a div yield of around 3.5% and will trade on a discount to the mkt and peers of ~6x ev/ebitda. I'd still say SODA and whole entity is a BUY. Questions are 1) msci weighting? And 2) what would ebitda growth profile look like? I don't know the answer to either question. In fact, I would love to know as much about something as most people appear to know about everything,”

Before the merger announcement, the shares of Sisecam Group companies began to rally.

Sisecam Group Borsa Istanbul-listed Companies                
  Market Sales y/y EBITDA y/y Profit y/y Profit y/y    
TRYmn Value 2019 % 2019 % 2019 % Q4 % P/E P/B
Sise Cam 12,555 18,059 16% 3,831 13% 1,905 -17% 546 154% 6.6 0.9
Soda Sanayii 6,460 4,182 22% 1,018 6% 1,109 -29% 297 264% 5.8 1.1
Trakya Cam 5,138 6,651 13% 1,132 -5% 750 -21% 259 43% 6.9 0.8
Anadolu Cam 3,375 4,307 33% 1,069 42% 527 17% 99 33% 6.4 1.2
Denizli Cam 149 132 24% 7 -17% -6 - -1 - - 2.3
source: seker invest                      

Minority shareholders of the merging companies will have an exit right or will receive Sisecam shares. Sisecam hired PWC for the valuation of the companies.

In December, the Turkish Wealth Fund (TVF) said that it was planning to take over insurance and pension companies owned by state lenders and to consolidate them. The companies to be taken over include Gunes Sigorta (GUSGR), Halk Sigorta (HALKS) and Ziraat Sigorta as well as pension companies Halk Hayat, Ziraat Hayat and Vakif Emeklilik.

Also in December, OYAK Group announced that it had decided to launch a process to merge its Borsa Istanbul-listed cement companies Aslan Cimento (ASLAN), Bolu Cimento (BOLUC), Mardin Cimento (MRDIN) and Unye Cimento (UNYEC).

Major M&As
Date Sold Stake Price Buyer Seller
Jan-20 SODA, ANACM, TRKCM, DENCM - - Sisecam Merger
Jan-20 McDonald's Turkey 100% TRY281mn Birlesik Holding Anadolu Group
Jan-20 Sanovel 30% $200mn Yamma Investments Toksoz Group
Jan-20 Total, M Oil 100% $360mn Oyak Demiroren
Jan-20 Glovo Turkey 100% - Exit Glovo
Jan-20 JCR Eurasia 85.05% - Consortium Japan Credit Rating Agency
Jan-20 Intourist 100% - Anex Tour Thomas Cook
Jan-20 Akbank 1.9% TRY9.3mn - Minority shareholders
Jan-20 Halkbank 1.5mn TRY6.76- 6.81 @Borsa Istanbul Halkbank
Jan-20 Gunes Sigorta 27mn TRY2.28-2.45 @Borsa Istanbul Vakifbank
Jan-20 Inteltek 55% - Intralot Iberia Turkcell
Jan-20 Goulette Shipping Cruise 100% - GPH - MSC -
Jan-20 Batiliman 100% $75-110mn Habas Baticim
Jan-20 Neckermann 100% - Anex Tour Thomas Cook
Dec-19 Borsa Istanbul 10% - TVF EBRD
Dec-19 Istanbul Gida 100% TRY77mn Yasar Serdengecti Ulker Biskuvi
Dec-19 Is Invest 0.226mn TRY4.49-4.55 @Borsa Istanbul Isbank
Dec-19 Is Invest 0.162mn TRY4.29-4.36 @Borsa Istanbul Isbank
Dec-19 ICA 51% $688.5mn Consortium Astaldi-Ictas
Dec-19 Adana, Aslan, Bolu, Mardin, Unye OYAK Merger
Dec-19 SOCAR Polymer 10% - Tekfen Holding Socar-Pasha Holding
Dec-19 Gunes S., Halk S., Ziraat S., Halk H., Ziraat H., Vakif E. TVF Ziraat Bank, Halkbank, Vakifbank
Dec-19 Vakifbank 51.85% TRY2.83bn Treasury Directorate of Foundations
Nov-19 Yapi Kredi 9.02% TRY1.41bn Koc Holding UniCredit
Nov-19 Bucher Reisen & Oger Tours 100% - Anex Tour Thomas Cook
Nov-19 Oztiryakiler 28.5% - Hoshizaki Corp. Oztiryakiler
Nov-19 Istanbul Tower 100% $594mn ICBC Turkey Yesil REIT
Sep-19 Air Manas 49% €98,000 Avia Trade Pegasus
Aug-19 Temsa Machinery 41% - Marubeni Sabanci Holding
Aug-19 Denizbank 99.85% $2.77bn Emirates NBD Sberbank
Jun-19 TSKB REIT 0.142 mn   TSKB @Borsa Istanbul
Jun-19 Coca Cola Icecek 0.16mn/0.07% TRY30.3 @Borsa Istanbul Ozgorkey Holding
Jun-19 iyzico majority $165mn PayU Founders
May-19 Temsa Bus Light Truck 100% TRY375mn True Value Capital Sabanci Holding
May-19 Parasut - - Turkven, Early Bird Revo, Ribbit
May-19 Foriba - - Sovos Revo Capital
May-19 Ictas Surdurulebilir - $100mn EBRD IC Energy Holding

Sisecam, established in 1935 by Isbank on the order of Ataturk, operates in flat glass, glassware, glass packaging, and chemical businesses with a total of 43 production facilities—16 local and 27 abroad—with 22,000 employees. International sales constitute 60% of the group’s total sales. 

Sisecam Group is Turkey’s leading company in the production of all types of glass as well as in chemicals including soda-chromium compounds. It is one of the leading glass and glass components makers in the world.​

Sisecam is the third largest glassware, fourth largest glass packaging and fifth largest flat glass manufacturer in the world in terms of production capacity.

The company is 75%-owned by Is Bankasi, one of Turkey’s largest private lenders, and Is Bankasi subsidiaries, while 25% of its shares are in free floataccording to an investor presentation on Sisecam’s website.

In November 2018, Sisecam decided to buy back a 14.85% stake in its subsidiary Pasabahce held by the European Bank for Reconstruction and Development (EBRD) for €152.6mn.

In May 2018, local authorities declared a disaster when chemicals from the Sisecam Soda Lukavac soda ash factory in northern Bosnia & Herzegovina polluted the Spreca river, killing fish and damaging surrounding land.