Turkish Retailer DeFacto to Cut Debt, Open Stores With IPO Funds

(Bloomberg) -- Turkish fashion outlet DeFacto Perakende Ticaret AS will use proceeds from a share sale next month to cut debt and fund an expansion at home and abroad.

The ready-to-wear clothing retailer plans to open as many as 110 stores in each of the next three years through 2020, Chief Executive Officer Ihsan Ates said in an interview in Istanbul. The company, which had sales of 2.65 billion liras ($674 million) and net debt of $117 million at the end of 2017, has 464 stores, 134 of them in 24 countries outside of Turkey, he said.

DeFacto’s owners are planning to sell as much as 29.8 percent of the company through an initial public offering, with a roadshow to market the shares due to start in Turkey on Wednesday before visiting international investors in major financial centers next week, the CEO said.

“We are also aiming to have sufficient liquidity for any inorganic growth opportunities,” Ates said. “Having the IPO will give us the required leverage to move fast if there’s an opportunity to acquire assets.”

Double Sales

DeFacto, which competes against the country’s biggest ready-to-wear retailer LC Waikiki Magazacilik, is especially interested in expanding in Kazakhstan, Iraq, Egypt and Morocco, either through new store openings or through acquisitions, Ates said. The company bought the Turkish outlets of Germany’s C&A Mode GmbH & Co. in 2016 as well as some stores of local brands to prop up its domestic growth.

The affordable clothing retailer aims to almost double the share of its sales from international operations by the end of 2020 from about one-fifth at the end of 2017, he said.

A fund within the Templeton Emerging Markets Group, which bought 8.7 percent of DeFacto in 2015 for an undisclosed price, isn’t considering selling its stake in the IPO, said Ates. The sellers will be founding shareholders including the biggest one, Zeki Cemal Ozen, who has a 66.5 percent stake in the company, he said.

Companies are taking advantage of subsiding political uncertainty in Turkey to do share sales, though lingering concerns mean demand has sometimes been weak. The value of IPOs this year already surpassed funds raised in the previous three years combined, according to data compiled by Bloomberg.

Germany’s E.ON SE and Turkish partner Haci Omer Sabanci Holding AS sold a stake in their Enerjisa Enerji AS electricity distributor at the lower end of their expectations, while weak demand forced MLP Saglik Hizmetleri AS, majority owned by private-equity firm Turkven, to lower its price range before going public.

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