Bloomberg News

HSBC to UBS See Turkey Value Gain as CBQ Pays ‘Top Dollar’

March 22, 2013

UBS AG (UBSN), Switzerland’s largest bank, and HSBC Holdings Plc (HSBA) said Turkish deals are becoming more expensive as investors such as Commercial Bank of Qatar QSC (CBQK) seek acquisitions to benefit from an accelerating economy.

“Everyone’s a strong believer in the growth prospects of the country and that sends the sellers’ expectations higher,” Selim Kervanci, head of global banking in Turkey for HSBC, said in an interview at the bank’s offices in Istanbul on March 20. “One transaction sets the benchmark for the next.”

Turkey is attracting investors seeking to tap a near $800 billion economy set to grow about 4 percent this year. Commercial Bank of Qatar, known as CBQ, said earlier this week it agreed to buy a 70.8 percent stake in Turkey’s Alternatifbank AS for two times book value. That compares with OAO Sberbank’s acquisition of Turkey’s Denizbank AS from Belgium’s Dexia for 1.3 times book value, or about $3.8 billion, last year.

“Valuation expectations on the part of sellers are quite high,” Gonca Gursoy Artunkal, chief executive officer of UBS Securities in Istanbul, said in an interview yesterday. “The latest CBQ acquisition seems to have set the multiple higher.”

While there’s appetite for deals in health care, infrastructure, insurance and pension companies in Turkey, transactions may take longer to complete due to the high multiples, Kervanci said. The enterprise value of listed Turkish companies is 10 times earnings before interest, tax, depreciation and amortization, more than double that in Russia and Poland, according to data compiled by Bloomberg.

Advent Closes

Excessive valuations for potential targets prompted U.S. private equity firm Advent to shut its Istanbul office, Turkey’s Hurriyet newspaper reported yesterday, citing office head Kayril Karabeyoglu. Spending the firm’s resources in the country under current conditions isn’t rational, it said.

“Despite these exits, I would say there’s increased level of interest in Turkish assets,” UBS’s Artunkal said. “And with large scale privatizations coming up, I would think this year we would replicate last year’s success.”

Investors poured into Turkey after the economy accelerated 8.2 percent in the third quarter of 2011, the fastest increase among Group of 20 countries after China. The economy, which expanded 2.5 percent last year, according to Economy Minister Zafer Caglayan, is forecast to grow 4 percent this year.

Alternatifbank’s book value was 585.1 million liras ($323 million) at the end of 2012, CBQ said in a March 18 statement. The sale will be based on the book value of Istanbul-based Alternatif at the end of this June, the bank said.

‘Top Dollar’

CBQ is doing the deal “at top dollar valuation,” Jaap Meijer, a director of equity research at Dubai-based Arqaam Capital Ltd, wrote in an e-mailed note to clients. “We downgrade CBQ to sell and add CBQ to our Avoid Portfolio.”

Ernst & Young LLP said in January it expects mergers and acquisitions in Turkey to rise to $25 billion this year from $23.2 billion in 2012. The country has drawn international investors such as Diageo Plc, Russia’s OAO Sberbank, E.ON SE, Amgen Inc. and Aeroports De Paris in the past two years.

Turkey’s government approved the sale of Seyitomer power plant for $2.25 billion and Ankara gas grid Baskent Dogal Gaz for $1.16 billion this month.

A secondary public offering of shares in state-run Vakifbank may take place in second half, according to Deputy Prime Minister, Ali Babacan, after the Turkish Treasury takes over 58.5 percent stake from the Directorate of Foundations.

Qatar National Bank SAQ, the Middle East’s biggest bank by assets, may seek to buy a stake in one of the top 10 lenders in Turkey as it boosts expansion overseas, Chief Financial Officer Ramzi Mari said in December.

To contact the reporter on this story: Sibel Akbay in Istanbul at

To contact the editor responsible for this story: Dale Crofts at

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