Retail Sector Update

Corporate Finance June 2012

2011-2012 Transaction highlights

Deloitte Turkey Corporate Finance (DTCF) assumed various financial advisory roles in recent M&A transactions in the retail sector in Turkey. DTCF advised clients on the sell-side and buy-side both in M&A Advisory and Due Diligence Services as well as in valuation and market analyses. Selected engagements are listed below:

Lead financial advisor to Silk & Cashmere

Vendor due diligence services to YKM

In its sale to Eastgate Capital Group

Regarding the acquisition of balerin.com

Turkey

Due diligence services to Naspers

Due diligence services to 212 Capital Partners

Turkey

Sale advisory to a footwear retail company

Turkey

Sale advisory to an apparel retail and manufacturing company

Regarding the acquisition of Markafoni

Turkey

Acquisition advisory to a Gulf based group regarding its proposed acquisition of a local women’s apparel and footwear retail group

On -going

Turkey

Acquisition advisory to a Gulf based group regarding its proposed acquisition of a local department store chain

On -going

Turkey

Vendor due diligence services to a Turkish hosiery products manufacturer and retailer

Turkey

Review of the retail operations of Café Crown

On-going

Turkey

Vendor due diligence services to a leading shoe retailing and manufacturing group

Turkey

Due diligence services to a foreign retail chain regarding its proposed acquisition of Praktiker

Regarding a joint -venture establishment with Caribou Coffee

Discontinued

Turkey

Turkey

Turkey

1

Industry trends

Macroeconomic Performance According to the official figures, Turkey is the 18th largest economy in the world with a GDP of US$772 billion in 2011. Due to the fragile global economic environment as well as the need to reduce the current account deficit, the Turkish economy is expected to make a soft-landing in 2012 and to regain momentum in the following years in a more sustainable manner. The economy, which grew 8.9% in real terms last year, is expected to grow by 3.5% in 2012.

Industry Commentary The Turkish retail market is continuing its sustainable growth in line with increasing purchasing power per capita and the development of modern and organized retailing. The per capita private consumption of US$7,350 in 2011 is expected to exceed US$10,000 by 2015. Strong economic performance supported by a young population stimulates growth in spending per capita. As a consequence of the strong demand from Turkish consumers, retail investments have been experiencing great momentum in recent years. Thanks to a number of fueling factors, Turkey became one of the most popular destinations for foreign investors including private equity firms, global supermarket chains, fashion retailers and several other retail concepts.

Private Consumption per Capita

1,400 1,200 1,000 800 600 400 200 0

1,224 12%

8.9% 8.5%

1,122 1,006

8%

886 4.7%732 735 772 778 4.0%5.2% 5.3% 5.1%4% 648 3.5% 615 1.1%

0%

(-4.7)%

12,000 10,000

8,000 US$

US$ million

Macroeconomic Performance

6,000

-4%

4,000

-8%

2,000 0

GDP (US$ bn) at Current Prices A: Actual, F: Forecast Source: EIU, Turkstat

2

Real GDP Growth (%)

CAGR (2012-2016) 10,990 = 9.5% 10,210 9,330 8,470 7,640 7,140 7,350

7,090 6,480 6,040

The total size of the retail sector (organized and unorganized) in Turkey is expected to reach US$313 billion in 2012 and grow with c.10% CAGR until 2016. Organized retail, a highly promising segment due to increasing per capita consumer spending and relatively weaker presence up to now in comparison with developed markets, is estimated to be c.40% of the total retail industry in Turkey.

Retail Sales in Turkey

Market Structure CAGR: 9.9%

500

US$ billion

400 300 200

100

CAGR: 3.4%

264 288

Limited total surface rent area, compared to robust consumer demand and rapid urbanization, triggered large scale retail investments across the country. The number of shopping malls in Turkey increased by more than 20% in the last two years and reached c.300 at the end of 2011. In the same period, the total surface rent area in Turkey increased by more than 30% and reached c.7.3 million m2.

313 295 302

355

170 248 139 144 149 121 133 115

389 187

421 204

Food vs. Non-Food

457 224

233 185 202 217 143 155 133 156 158 164

Unorganized 60%

Organized 40%

Non-Food 48%

Food 52%

0 Source: EIU

Food

Non-Food

Source: EIU

Category Commentary Food and Beverage Food and beverage, which has the largest share (c.52%) in the Turkish retail sector as of 2011, is expected to grow at c.9% CAGR in the next five years and reach US$233 billion in 2016.

* Excluding C2C sites, sales of automotive products, tickets for events and travel, gambling, quick delivery of food, magazines, household goods, etc.

Home Retail The home retail market in Turkey, comprised of household furniture and textile products, reached c.US$48 billion in 2011. The market is expected to grow CAGR c.10% in the next 5 years and reach c.US$70 billion in 2016. Apparel Retail Starting from 2012, apparel sales in Turkey are expected to grow CAGR c.12% and reach c.US$41 billion in 2016.

Consumer Electronics Consumer electronics, having c.4% share in the Turkish retail sector, are expected to grow by c.65% in the next 5 years. Consumer electronics spending per capita is also expected to increase by more than 50% in the same period. Internet Retail According to the Interbank Card Centre, the total value of e-commerce transactions was US$13.6 billion in 2011 which is 50% higher than in 2010. Out of this US$13.6 billion, the consumer goods internet retail market(*) amounted to c.US$1.3 billion and is expected to grow with a CAGR of c.12% between 2012-2016, reaching c.US$2.3 billion. 3

Industry focus: internet retailing in Turkey

Internet Penetration Internet penetration in Turkey has more than doubled in the last 5 years and reached 45% in 2011. Mainly driven by the young population and increasing income level, internet penetration is also positively affected by discounted prices and expanded coverage. Turkstat’s household information technology usage survey, conducted between January-March 2011, reveals that 47% of internet users in Turkey used the internet to find information on goods and services whereas 7% purchased goods during the period. Internet Retail Still in its infancy, the internet retail sector in Turkey is growing at a remarkable pace through a number of brand new initiatives and strong demand from online consumers. Data maintained by the Interbank Card Center, the Turkish clearinghouse for bank cards, shows that e-commerce transactions (including non-retail) through virtual point of sales (VPOS) grew with a CAGR of 60% in the past seven years and reached c.23 billion TL in 2011.

According to e-commerce intelligence source Internet Retailer, two Turkish companies appear in the Top 150 internet retailing websites of Europe. Hepsiburada.com (ranked 89th), a group company of Doğan Holding operating as a mass merchant, was the leading internet retailer in Turkey in 2011 with c. US$190 million revenue followed by Markafoni (ranked 143rd), a pioneer online apparel retailer, with a revenue of c.US$95 million. Online apparel shopping clubs offering products at discounted prices and deal-of-the-day websites are popular destinations among Turkish internet users. Increasing consumption through online media shows that security concerns are not a headwind for Turkish consumers as they were in the past. According to the Interbank Card Center, there are nearly 7,400 ‘‘3D Secure’’ registered virtual shops in Turkey as of 2011. Increasing activity of private equity investors and venture capitalists with a focus on e-commerce is becoming a dominant trend in the sector.

E-Commerce Transactions Through VPOS* 25,000

Internet Penetration in Turkey 22,874

20,000

40%

million TL

15,225

15,000

30%

9,089

10,000

0

1,388 2005

30%

10%

2007

* Virtual Point of Sale Source: The Interbank Card Center

4

38%

45%

20%

2,412 2006

36%

42%

10,274

5,537

5,000

50%

2008

2009

2010

2011

0%

2007

Source: Turkstat

2008

2009

2010

2011

M&A snapshot

M&A Activity in Turkish Retail Sector M&A activity in the Turkish retail sector had shown a fluctuating trend in recent years when compared to the global marketplace. However, by comprising 4.3% of the total M&A deal value, the Turkish retail sector proved its potential in a year like 2011 where private sector activity was dominant.

There were 11 transactions(*) in the retail sector in 2011, with an estimated deal value of c.US$640 million. In the last five years, 37 retail deals have been generated with an estimated value of US$4.5 billion. In the first quarter of 2012, the Turkish retail sector saw profound activity through 5 deals(*).

* Excluding internet retailing transactions.

Global M&A Activity

3,000

4%

3.6% 2,936

2.0%

2,073

2.0%

2.0%

2% 1%

1,000 138 0

59

2007 2008 Total Deal Value

41

2009

Source: Mergermarket, Thomson Reuters

49

77

2010 2011 Retail Deal Value

0%

25 20

20.4% 19.3

20%

16.2

15

15

0

15% 10%

10 5

25%

29

30 2,5643.0% 3%

2,434

2,000

35

US$ billion

US$ billion

4,000

M&A Activity in Turkey

3,799

0.3 1.6% 2007

3.3

2008

5.2

4.3% 5% 0.6 0.7% 0% 2010 2011

0.1 1.9% 0.2 2009

Total Deal Value

Retail Deal Value

Source: Mergermarket, Dealwatch, Deloitte Data

Highlighted Transactions February 2012 - Boyner, the leading department store chain in Turkey has announced that it signed agreements to acquire a 63% stake in its major competitor YKM for a consideration of US$108 million. December, 2011 - East Gate Capital Group, Dubai based private equity and real estate investment subsidiary of NCB Capital, made its first investment in Turkey and acquired a 49.8% stake in Fabeks, owner of the Silk & Cashmere brand, which is one of the leading cashmere brands globally, for an undisclosed sum.

June, 2011 - Gözde Girişim Sermayesi, private equity investment arm of Yıldız Holding, acquired 99.6% of Şok Marketler from Migros for a consideration of US$380 million.

May, 2011 - Kuwaiti investment company Global Investment House acquired a stake in Yargıcı, Turkish retailer of women’s apparel and accessories, for an undisclosed sum.

5

M&A Activity in the Turkish Internet Retailing Sector transactions since the first transaction in 2010. Thanks to rapidly growing internet penetration Apparel discount shopping club websites being in and an increasing number of online merchants, the first place, deal-of-the-day websites and online the internet retailing sector in Turkey has been apparel retailers attracted most of the attention experiencing a boom. In order to benefit from during the period. the high growth potential of the sector, local and foreign investors are showing great interest M&A activity in the Turkish internet retailing sector in established internet brands as well as to promising initiatives being brought to light by local reached its historical peak in 2011 with a total of 12 transactions. The first quarter of 2012 which entrepreneurs. saw 7 deals also signals a strong trend in terms of M&A activity. The statistics for M&A activity for The Turkish internet retailing sector hosted 2011-1Q12 period are presented below: a record level of activity with a total of 20

Type of Investor

Highlighted Transactions March 2012 - Markafoni, backed by Naspers, acquired 75% of Doğuş Holding’s En-moda, an apparel discount shopping club website which became operational in June 2011. December, 2011 - E-commerce giant Amazon made its first investment in Turkey by acquiring 19% of Çiçeksepeti, Turkey’s leading online flower and gift retailer. August, 2011 - USA-based private equity houses Tiger Global Management and Kleiner Perkins Caufield & Byers acquired a total of 37% shareholding in Trendyol, leading Turkish apparel discount shopping club website. Prior to this transaction, in January 2011, Tiger Global Management had acquired a 20% stake in the same company. 6

Investor Origin

Transactions by Business Area

May, 2011 - South African multinational media company Naspers acquired 68% of Markafoni, one of the pioneer apparel discount shopping club websites of Turkey for a consideration of US$86 million. April, 2011 - eBay announced its acquisition of an 83% shareholding in the Turkish consumer-toconsumer website Gittigidiyor for US$217 million. Prior to the transaction, eBay was holding a minority stake in the company.

Transactions in the Turkish internet retail sector

# Acquirer

Stake

Deal Value (US$ million)

Origin

Target

Area of Business

1 212 Capital Partners

Turkey

Butigo.com

Shoe Retailing

N/D

N/D

2 212 Capital Partners

Turkey

Balerin.com

Cosmetics Retailing

N/D

N/D

3 Etohum Yatırım

Turkey

Biacayip.com

Lifestyle Products and Gifts

N/D

N/D

4 Tiger Global Management

USA

Sporcum.com

Sportswear Retailing

68.3%

N/D

5 Private Investors

Turkey

e-bebek.com

Infant & Baby Products Retailing

50.4%

N/D

6 Doğan Online

Turkey

Evmanya.com

Furniture and Home Products Retailing

100.0%

N/D

7 Markafoni.com

Turkey

En-Moda.com

Apparel Discount Shopping Club

75.0%

N/D

1Q12

2011 8 Amazon

USA

Ciceksepeti.com

Online Flower and Gift Store

18.7%

N/D

9 Tiger Global Management

USA

Trendyol.com

Apparel Discount Shopping Club

20.1%

N/D

10 iLab Ventures

Turkey

Unnado.com

Apparel Discount Shopping Club

33.0%

N/D

11 Bilyoner Interaktif Hizmetleri

Turkey

Bombastik.com (Former Grupca)

Deal-of-the-Day Website

30.0%

N/D

12 Hummingbird Ventures

Belgium

Ciceksepeti.com

Online Flower and Gift Store

N/D

N/D

13 eBay

USA

GittiGidiyor.com

C2C Online Auction and Shopping

14 iLab Ventures

Turkey

Cimri.com

Electronics Retailing

15 Naspers

Netherlands

Markafoni.com

16 ePlanet Capital

USA

17 Intel Capital Tiger Global Management; 18 Kleiner Perkins Caufield & Byers 19 Quants Holding

83.0%

217.0

100.0%

N/D

Apparel Discount Shopping Club

68.0%

86.0

Vipdukkan.com

Apparel Discount Shopping Club

28.2%

5.0

USA

Grupanya.com

Deal-of-the-Day Website

N/D

N/D

USA

Trendyol.com

Apparel Discount Shopping Club

36.7%

N/D

Switzerland

Grupfoni.com

Deal-of-the-Day Website

N/D

N/D

USA

Trendyol.com

Apparel Discount Shopping Club

N/D

N/D

2010 20 Tiger Global Management Source: Deloitte Annual M&A Reviews

7

Market snapshot

Market Cap as of 25 May 2012

Enterprise Value (EV)

EV/Sales

EV/EBITDA

P/E

Global Apparel Retail GAP

13,336

13,063

0.9x

6.4x

17.4x

Hermes

33,861

35,109

9.4x

26.9x

47.2x

Macy's

15,565

20,526

0.8x

5.8x

12.2x

US$ million

Turkish Apparel Retail Altınyıldız

610

884

2.4x

11.1x

32.2x

Boyner

152

205

0.5x

6.3x

11.7x

Vakko

117

150

1.1x

9.7x

27.7x

12,200

28,287

0.3x

10.0x

n/a

Global Food Retail Carrefour Metro

9,274

15,023

0.2x

3.8x

11.9x

Tesco

38,955

53,750

0.5x

6.5x

8.7x

Wal-Mart

222,098

253,123

0.6x

7.3x

13.0x

938

958

0.7x

83.6x

n/a

Turkish Food Retail CarrefourSA Kiler Migros Tesco Kipa

228

378

0.8x

12.1x

n/a

1,497

2,587

0.8x

11.7x

479

819

0.7x

11.5x

89.2x 99.8x

Source: Capital IQ, Public Disclosure Platform

8

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For more information about M&A Advisory Services contact: Başak Vardar Partner [email protected] + 90 (212) 366 63 71 DRT Kurumsal Finans Danışmanlık Hizmetleri A.Ş. Sun Plaza Maslak Mah. Bilim Sok. No:5 34398 Şişli, İstanbul Tel: 90 (212) 366 60 00 Fax: 90 (212) 366 60 30

Punta Plaza 1456 Sok. No:10/1 Kat:12 Daire: 14 – 15Alsancak, İzmir Tel: 90 (232) 464 70 64 Fax: 90 (232) 464 71 94

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