Greek business changing face

Buyout firm Marfin Investment Group’s (MIG) acquisition of a 30 percent stake in Greece’s largest food group, Vivartia, announced yesterday, seems to be only the tip of the iceberg. The Greek economy is being daily drawn into the global frenzy of business deals, and all serious analysts agree that a new round of mergers and acquisitions which will spectacularly change the country’s business establishment, is within sight. New entrepreneurs’ names now figure at the top of the pyramid, while others, well recognized for decades, are withdrawing discreetly. The main force propelling the changes is the ample global liquidity, a good part of which is accounted for by Greek-owned shipping and is being invested not only in property but also in domestic and foreign funds. Proof of the high liquidity held by Greek shipping interests is that Theodoros Angelopoulos received more than $1 billion from the sale of his fleet a few days ago. This huge liquidity, of which only a small part flows into Greece, is a truly explosive force, capable of causing major upheavals in business. In the first half of this year, private equity funds around the world are estimated to have raised a staggering $260 billion. These funds are now urgently looking for credible shares and healthy enterprises in which to invest, in order to reap the immediate benefits. However, the most worrying thing is that the owners of this huge pool of liquid funds are in a hurry because they sense that the cycle of high returns is coming to its peak. In Greece, the ample liquidity has already led, among other things, to successful buyouts, such as National Bank’s acquisition of Turkey’s Finansbank (3.5 billion), to rights issues by Eurobank and Piraeus Bank, totaling about 3 billion, to MIG’s mammoth 5.2 billion share-capital increase, and to the privatizations of OTE telecoms and the Postal Savings Bank. Before MIG’s move on Vivartia, Egyptian telecoms magnate Naguib Sawiris acquired TIM, Greece’s third-largest cellular phone operator, for 3.4 billion. This mobility is evident in many sectors, including energy, where Hellenic Petroleum, Greece’s largest refiner, last week agreed with Italy’s Edison on a joint venture for power production. This chorus of billions is expected to continue, as the new shares issued by Greek firms are snapped up, and the bull market on the Athens bourse keeps drawing increasing amounts of foreign capital. The government, on its part, seems to have mixed feelings about the rapid developments. On the one hand, it considers that buyouts and share capital increases prove the confidence of foreign investors in the stability and future of the economy but, on the other, it fears that developments may prove too rapid and change existing balances, indeed, leading to new centers of economic power which cause unchecked upheavals. European ambitions MIG’s acquisition of 30 percent of Vivartia is seen as its first major move on the Greek business chessboard, to be followed soon by further moves in real estate, telecoms and information technology. According to sources, Attica Properties, a small company recently acquired by MIG, will announce a share-capital increase in the coming days, with a view to becoming the country’s largest real estate firm. Indeed, the group is said to be in such an advanced stage of talks on many fronts that only the final announcements remain, as in Vivartia’s case. MIG aims to utilize its unprecedented, by Greek standards, massive liquidity of 15 billion without delay and complete all its major strategic moves by early 2008 at the latest. Its strategy is to acquire about 10 strong companies in key sectors, such as banking, foodstuffs, telecoms, tourism, realty, information technology and energy. These companies will function as the headquarters for MIG’s expansion into the broader region, with a view to each becoming an international leader in its domain. Its strategy is to move in a «friendly» approach so as not to weaken the administrative and managerial potential of the companies it is targeting. In the food sector, therefore, Vivartia will provide the vehicle through which the group will proceed to further acquisitions from Romania to Russia, becoming a powerful European player. A large capital increase is envisaged to finance these acquisitions. This ambitious international targeting, apart from the high price offered for the company by MIG (38 percent premium), played a significant role in reaching an agreement: Dimitris Daskalopoulos and Spyros Theodoropoulos will remain at Vivartia’s helm but also as shareholders. Respectively, the group’s Hygeia private hospital will provide the base for MIG’s expansion into the health sector in Southeastern Europe. Last week’s announcement of Hygeia’s setting up of a private clinic in Tirana, Albania, is to be followed by more moves in neighboring Balkan countries where the private health sector is still in its infancy. In banking, the vehicle will certainly be Marfin Popular, headed by parent Dubai Group’s Saud Ba’alawy. Nevertheless, many are expressing misgivings: Such a large investment plan, giving MIG a dominant position in many sectors, can give rise to distortions in a small market such as Greece’s, they argue. And what’s worse, if the ambitious plan falters, there is a risk of the edifice collapsing, with an impact too strong for the small market. New MIG shares launched in trading today Marfin Investment Group’s (MIG) new shares, the result of its recent mammoth -5.2 billion share-capital increase, will be launched in trade on the Athens bourse today. The market’s reaction to the Vivartia deal, high expectations of further moves and the fact that MIG’s share is traded at a price significantly higher than the price at which the new shares were offered are expected to cause volatility, at least during the first days of trading. According to sources, subscribers to the issue were Dubai Financial with about -500 million, Fidelity with -200 million, Templeton with -200 million and lesser amounts from banks, such as Citigroup, Morgan Stanley, Dresdner, Deutsche and aggressive hedge funds such as Centaurus Capital. A large number of Greek shipowners are also said to have subscribed to MIG’s capital increase. The group is thought to be about to announce the completion of negotiations for raising a further -10 billion through borrowing.

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