Debut Bond Sale by Turkish Winemaker Could Set Stage for IPO
Debut Bond Sale by Turkish Winemaker Could Set Stage for IPO
(Bloomberg) -- Turkish winemaker Suvla AS plans to sell bonds this week as it sets the stage for an initial public offering as early as next year.
Suvla -- based in the town of Eceabat on the Gallipoli peninsula-- will place 11 million liras ($1.87 million) of two-year debt with local asset manager Istanbul Portfoy on Wednesday, founder and owner Selim Zafer Ellialti said in an interview. The offering will be the sector’s first.
The company is also in talks with foreign investors including the European Bank of Reconstruction and Development for equity financing, Ellialti said. “With sales improving rapidly, we will probably be big enough to launch our IPO in 2021-2022,” he said.
The aggressive expansion plan comes despite what remains a challenging environment for winemakers in Turkey, with Suvla betting that sales will continue to grow. The winemaker’s revenue has increased an average 50% each year since it was founded in 2012, Ellialti said.
Under President Recep Tayyip Erdogan’s rule, Turkey banned advertisements of alcoholic beverages, imposed one of the world’s heaviest tax duties, and set a 10 p.m. deadline on retail sales.
Still, Suvla plans to increase its wine production capacity by 25% in 2020 and is penciling in 18 million liras of earnings before interest, taxes, depreciation and amortization, up from 12-14 million liras last year, Ellialti said.
Tax Burden
Suvla holds a 1.5% share of the highly-fragmented wine market in Turkey, Ellialti said. It also runs four restaurants, six retail stores and an olive oil production unit, he said.
According to data from the revenue administration and the nation’s statistics agency, the average tax rate on a bottle of wine has risen more than five-fold since 2009, compared with a more than three-fold increase in the average retail price.
Despite a more than 60% depreciation in the lira since 2015, the total value of Turkish wine exports has dropped more than 14%, to just over $9 million in 2019, according to data from the nation’s statistics agency.
--With assistance from Taylan Bilgic.
To contact the reporter on this story: Inci Ozbek in Istanbul at iozbek2@bloomberg.net
To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, Constantine Courcoulas, Paul Abelsky
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