Domo being eyed by investment funds

British fund Equest Partners is most advanced
in terms of negotiations, according to market sources. Market sources estimate the value of the sale to be between €40-60 million.  Contacted by Business Standard, Horia Manda, Senior Vice President and Chief Investment Officer of the Romanian-American Enterprise Fund, which owns 9.3 percent of Domo, said: “I cannot comment on an ongoing process.” Domo General Manager, Lorand Szarvadi, also declined to comment on the sale. The investment funds each have a different proposal, ranging from 49-75 percent of the company. All funds are insisting that the management and founder shareholders remain in the company for at least three years following the sale.
Domo shareholders have been preparing a sale since December 2006, when the company was transformed into a holding. The founder shareholders sold their packages to Cyprus-based company Dominuise Management Ltd. Equest Balkan Properties (EBP), part of Equest Partners, entered the Romanian market in September 2005, after opening a subsidiary on the Bulgarian market in 2004. Equest Investments, a subdivision of Equest Partners, owns 51 percent of the household appliance retailer Tehnomarket, which has a 40 percent market share in Bulgaria. By the end of 2006, Equest Partners finalized 11 real estate transactions in Romania, Bulgaria and Serbia, totaling €335 million, of which eight on the Romanian market, estimated at €94.4 million. Domo, with a 15 percent market share, is not the only household appliance retailer being wooed by investors. Altex, the Romanian market leader, with net sales of €220 million and a 26 percent market share, is also being coveted by several investment funds. However, the company’s President, Dan Ostahie, said he is not interested in selling “for the time being.”
Investors are interested in acquiring electronics retail chains because the value of the market dropped by 15-20 percent in 2006 from 2005. This could be a favorable moment for an investor to buy a household appliance network, since the value of the market is expected to increase by 10 percent this year, up to €1 billion, due to an increase in purchasing power and a further elimination on loan restrictions.
Last year, Domo had sales worth €2,500/sqm, similar to that of one of its main competitors, Flamingo. The €5 million operational profit is explained by the fact that Domo had lower costs than its competitors to expand its network. Domo has 113 stores in Romania, totaling 46,000 sqm of selling area, and employs 1,050 people. In Bulgaria, the company has eight stores, with a total area of 5,000 sqm and 100 employees. Domo net sales reached €122 million last year in Romania and €3 million in Bulgaria.