In Romania's largest leveraged buyout and largest retail transaction to date, Dechert lawyers guided private equity buyout investor Mid Europa Partners (MEP) through the acquisition of Profi Rom Food, Romania's fastest-growing supermarket business.
MEP is the biggest private equity fund focused on investments in Central and Eastern Europe, with more than €4.6 billion of funds raised and managed since 2005. Dechert acted as lead transactional counsel to MEP and also advised on the acquisition financing.
Profi Rom, a modern retail network with 11,000 employees, generated €800 million in sales revenue in 2016. It has the widest geographical spread of any supermarket chain in Romania, with more than 500 stores. In addition to several urban store formats, it also operates a brand for rural customers, enabling it to reach regions previously untouched by modern retail businesses.
Putting together a winning bid
The transaction, which consisted of the acquisition of Profi Rom's entire issued share capital, was carried out by competitive auction. MEP beat off bids from other leading private equity sponsors.
It was to MEP's advantage that the private equity firm already had experience in the retail business. For some years, it owned a controlling stake in Zabka Polska, a nationwide chain of convenience stores in Poland, and a major shareholding in Allegro, Poland's leading online retailer. It had also established a presence in Romania in 2015 through its acquisition of Regina Maria, the country's largest private health care network.
A two-pronged approach
Dechert set up two teams in order to target the acquisition and the financing in parallel. The finance team:
- Coordinated negotiations under a short timeline between MEP's co-investors and members of management.
- Helped roll over Profi's existing financing into the new structure.
- Exploited a considerable enthusiasm among banks to fund the debt financing portion of the deal.
Complex acquisition structure
Simultaneously, a second team prepared MEP for the acquisition itself, which would touch on the laws of England and Wales, Luxembourg, Poland and Romania. The acquisition team:
- Utilized a packaged legal due diligence product developed by Dechert in order to streamline the due diligence process and minimize delays and distractions for management.
- Succeeded in accommodating the complex structuring requirements required by all parties on a time-sensitive basis.
- Overcame difficulties resulting from the transaction's complex co-investment process.
Quality assets — at advantageous terms
After overcoming a number of last-minute challenges, the parties concluded the complex transaction successfully — to the delight of MEP. With Dechert's help, not only did they acquire coveted Central European assets, but they did so by means of financing terms as advantageous as any utilized in Western Europe. Indeed, five months after the original closing, the Dechert team helped MEP close an additional and substantial financing package in the holding structure, enabling MEP to pay a dividend to its investors.
"The team at Dechert was integral to the delivery of a smooth and efficient process," said MEP partner Nikolaus Bethlen. "They worked closely alongside our team, enabling us to sign this multi-faceted retail transaction on market-leading terms and in short order."
As a measure of Dechert's achievements, the firm has since been retained as Profi Rom's portfolio counsel and has subsequently been engaged by MEP on a number of other mandates.
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