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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 C enter. Leading private equity firm in the Region. RUSSIA.
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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
Leading private equity firm in the Region RUSSIA BELARUS UKRAINE MOLDOVA Horizon Capital Executive Summary 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 TOTAL COMMITMENTS BY REGION
Value investing, growth and expansion capital Targets Key Competitive Advantages Competitive Environment Horizon Capital Investment Strategy • 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 experience in Moldova Horizon Capital Moldovan Portfolio Overview • One of the leading foreign direct investors in Moldova • Operational since 1997 • $54M invested in 8 companies, employing over 4000 people Our portfolio companies are market leaders in terms of quality of management, market share, profitability and growth Overview • FinComBank –dynamic Moldovan commercial bank • 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 TOTAL MOLDOVAN COMMITMENTS Currentportfolio • 2003: Vitanta-Intravest – dominant Moldovan manufacturer of beer and soft drinks • 2006: Moldova-Agroindbank – largest commercial bank • 2007: ProCredit Moldova – leading financial institution focused on micro and small lending • 2009: Natur Bravo – the largest Moldovan fruit and vegetable processor Exits Source: Country data; HC analysis
Mid-sized Moldovan bank with strong SME client base Horizon Capital FINCOMBANK • $8 million equity investment in fall of 2007 + $5 million loan in 2008 • Growth capital • 25% stake INVESTMENT RATIONALE • 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 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
Leading glass container company in the region Horizon Capital GCC / GC PRIM • $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 PERFORMANCE • 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 • GC Prim: • Built an efficient glass melting furnace, equipped with state-of-the-art forming equipment, with a capacity of over 130M bottles annually • Manufacturing started in June 2010 • Flint glass production
Horizon Capital SUCCESSFUL EXITS Vitanta-Intravest • Leading Moldovan beer and soft drinks producer • Original investment of $4.75 million, for 85.59% of shares (1998-1999) • 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
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. 8
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