Private Equity Investments in Moldova Horizon Capital Experience
by
Cristina Harea, Horizon Capital
Senior Associate
U.S. Business Mission 2010
June 15 – 17, 2010, Chisinau, the Republic of Moldova
Leogrand Hotel & Convention Center
Horizon Capital
Executive Summary
Leading private equity firm in the Region
Over $600 million under
management
Focus on mid-cap
companies in fast
growing sectors of
Ukraine, Moldova, and
Belarus
Investment size in the
range of $15-40 million
per deal
Since inception, we
have invested ~ $311
million in 43 companies
employing over 33,000
people
HORIZON CAPITAL
GEOGRAPHIC FOCUS
• Horizon Capital is the leading private equity
fund manager in Ukraine, Moldova and
Belarus, managing three funds:
• EEGF II (2008) – $390 million
• EEGF I (2006) – $132 million
• WNISEF (1995) – $150 million
• Over 15 years of investment experience in the
region
• Entrepreneurial team of professionals with
long common track record
• Superior network of relationships creates
pipeline and due diligence value
BELARUS
RUSSIA
UKRAINE
MOLDOVA
TOTAL COMMITMENTS BY REGION
Russia, $6,
2%
Moldova,
$54, 17%
Belarus,
$38, 12%
Ukraine,
$214, 69%
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Horizon Capital
Investment Strategy
Value investing, growth and expansion capital
Targets
Key
Competitive
Advantages
Competitive
Environment
• Profitable companies with medium- to long-term growth prospects
• Companies with sound business strategies, that need to right-size their operations by
divesting assets, or companies that face liquidity issues or funding constraints due to
banking liquidity situation
• Companies with strong management in fragmented industries with the opportunity to
consolidate sector via acquisition and/or organic market share growth
• Quality asset purchases from distressed sellers
•
•
•
•
One of few sources of patient capital in today’s market
Talented and dedicated investment team resident in the region
Deep proprietary pipeline
Broad access to information for due diligence, based on a broad network of business
relationships
• Ability to quickly capitalize on opportunities to buy sound companies at reasonable
valuations
• Superior reputation as credible, value-added investor in the Region
• Lack of liquidity in undercapitalized economies
• Only a few private equity players have capital and dedicated teams in the Region
• Valuation expectations coming down to more realistic levels
• Market leaders more open to partnership, corporate governance and sharing control
• High quality, well trained talent abundant in the market – potential sources of
management upgrades
Horizon Capital
Moldovan Portfolio Overview
Overview
• One of the leading foreign direct investors in Moldova
Current portfolio
Horizon Capital experience in Moldova
• FinComBank –dynamic Moldovan commercial bank
• Operational since 1997
• $54M invested in 8 companies, employing over 4000
people
• Glass Container Company – leading Moldovan
manufacturers of dark green glass packaging for the
wine and sparkling wine industry
• Glass Container Prim – new state-of-the-art
manufacturer of flint glass packaging
Exits
• 2003: Vitanta-Intravest – dominant Moldovan
manufacturer of beer and soft drinks
Our portfolio companies are market leaders in terms
of quality of management, market share, profitability
and growth
TOTAL MOLDOVAN COMMITMENTS
Financial
Services
29%
Agriculture
3%
Food
Processing
13%
FMCG
9%
Industrial Goods
46%
• 2006: Moldova-Agroindbank – largest commercial
bank
• 2007: ProCredit Moldova – leading financial
institution focused on micro and small lending
Source: Country data; HC analysis
• 2009: Natur Bravo – the largest Moldovan fruit and
vegetable processor
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Horizon Capital
FINCOMBANK
Mid-sized Moldovan bank with strong SME client base
• $8 million equity investment in fall of 2007 + $5 million loan in 2008
• Growth capital
• 25% stake
INVESTMENT RATIONALE
USD Million
• Impressive sector growth, but penetration remains low
− Banking assets grew 33% p.a. 2000-2007
• Major international banks yet to enter the market
• Well-positioned, highly profitable mid-sized bank (stable ROE of
ca.20% 2003-2007)
• #8 bank by assets country-wide
• Extensive country-wide network: 13 branches and 17 rep offices
• High quality SME client base (59% of loan portfolio)
• Strong position in cards
• Very professional and dedicated management team
TOTAL ASSETS AND NET ASSET VALUE
250
172.5
200
153.6
149.6
150
100
91.2
69.9
50
33.7
28.0
14.3
11.1
31.8
0
2005
PERFORMANCE
• Rapid growth pre-crisis (in 2007 loans grew by 73%)
• Network expansion in 2008 – currently 15 branches and 53
rep offices
• HC instrumental in attracting third party financing:
− $5 million EFSE line in November 2007
− $6 million OPIC loan signed in February 2009
 Pro-active anti-crisis management initiatives
 Strong focus on SME lending and services as platform for
future growth
2006
2007
Year of
Investment
Total Assets
2008
2009
NAV
5
Horizon Capital
GCC / GC PRIM
Leading glass container company in the region
• $5.3 million equity investment in GCC in late 1997 - 40% stake
• $7.1 million equity investment in GC Prim in 2007 - 90% stake
• 12.6$ million loan to GC Prim in 2009-2010
INVESTMENT RATIONALE
• Growing demand for quality glass containers in the region
• Company outfitted with modern glass production equipment,
with a capacity of 100M dark-green glass bottles annually
• Opportunity to establish first mover advantage in production
of high quality bottles, serving wine and sparkling wine
industries in Moldova and the region
SALES REVENUES AND NET INCOME
23.7
25
19.9
USD million
GCC:
• Recruited management team
• Attracted EBRD as a creditor and preferred shareholder to
the financial restructuring
• Led turnaround of a troubled start-up into a profitable and
successful company
20
15
18.0
10.8
19.1
16.2
15.3
17.3
15.3
13.2
9.5
10
5
2.3
3.0
3.3
2.3
0.3
2.4
3.2
4.9
0
-5
-3.3
1998
GC Prim:
• Built an efficient glass melting furnace, equipped with stateof-the-art forming equipment, with a capacity of over 130M
bottles annually
• Manufacturing started in June 2010
• Flint glass production
30.1
30
PERFORMANCE
1999
-0.3
-1.4
2000
2001
2002
2003
2004
2005
2006
2007
-2.1
2008
2009
Year of
Investme
Sales Revenues
Net Income
6
Horizon Capital
SUCCESSFUL EXITS
Vitanta-Intravest
• Leading Moldovan beer and soft drinks producer
• Original investment of $4.75 million, for 85.59% of shares (19981999)
• WNISEF-led “turn-around” situation, with a very strong
management team and a number of improvements over four
years
• In early 2003, WNISEF sold its stake to Efes Breweries
International B.V. at a return of 2.2x cash-on-cash
• WNISEF attracted a major international investor to Moldova that
continuously invests into the improvement of Vitanta’s production
capacities and major marketing efforts.
Moldova-Agroindbank
• Leading commercial bank in Moldova by assets, capital, loan
portfolio and deposits
• Original investment of $1.65 million, for 9.88% of shares
(2001)
• Invested on a pari pasu with EBRD, to finance the
implementation of a modern MIS, including credit card system
and telecommunications infrastructures
• In early 2006, WNISEF sold its shares on the Moldovan Stock
Exchange to a group of foreign financial investors at a return
of 3.6x cash-on-cash
7
Horizon Capital
SUCCESSFUL EXITS
Natur Bravo
• Leading Moldovan fruit and vegetable processor and
cannery
• $7 million investment - 100% buy-out in late 2005
• HC upgraded management team, centralized financial,
purchasing, sales & marketing functions
• Broadened product range with $4.5 million investment
in a modern sweet corn & pees production line
• Significant sales diversification and growth – doubled
sales from $15 million in 2005 to $30 million in 2007
• In fall of 2009 sold to a group of European private
investors at a 3.1 cash-on cash return.
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THANK YOU!
Cristina Harea
Senior Associate
Horizon Capital
12 Petru Movila Street, of.4
Chisinau, Moldova MD-2004
Tel: + 373 22 887 200
Fax: +373 22 887 202
www.horizoncapital.com.ua
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