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Delhaize to Buy Serbia’s Delta Maxi for $1.29 Billion

Customers browse the dairy products section of a Maxi Tempo supermarket in Belgrade. Photographer: Oliver Bunic/Bloomberg
Customers browse the dairy products section of a Maxi Tempo supermarket in Belgrade. Photographer: Oliver Bunic/Bloomberg

March 3 (Bloomberg) -- Delhaize Group SA agreed to buy Delta Maxi Group, Serbia’s largest food retailer, from Miroslav Miskovic’s Delta Holding for 932.5 million euros ($1.29 billion) including debt to revive sales growth.

The transaction values the operator of 450 stores in Serbia, Montenegro, Bosnia, Albania and Bulgaria at 10.4 times to 11 times estimated 2011 earnings before interest, tax, depreciation and amortization, Brussels-based Delhaize said today in a statement. It plans to complete the purchase in the third quarter and Delta will add to earnings immediately after.

Buying Delta will boost the Belgian food retailer’s annual revenue in southeastern Europe about 70 percent to 3.4 billion euros at a time Balkan nations seek deeper ties with the European Union to hasten an economic recovery. Delhaize said Delta Maxi’s markets will grow 5 percent to 7 percent a year in the next four years, at least twice as fast as western Europe.

“Much more emerging-markets exposure is what Delhaize needed,” John David Roeg, an analyst at ING Groep NV in Amsterdam, wrote in a note today “We like the deal in spite of the high Ebitda multiple.” Roeg has a “hold” rating on the stock.

Delhaize fell as much as 1.7 percent on Euronext Brussels and traded down 18 cents at 56.26 euros at 11:27 a.m. local time. The shares have advanced 1.8 percent since the start of the year, the fifth-best performance among the 25 companies included in the Stoxx 600 Retail Index.

Focus on Sales

Delhaize made accelerating sales growth its top priority in December 2009 as its U.S. business, which generates 70 percent of revenue, has reported declining same-store sales for the past two years.

It’s Delhaize’s biggest acquisition since the 2001 buyout of its U.S. unit in an all-stock transaction valued at 2.25 billion euros excluding debt. Today’s purchase includes about 300 million euros of debt, net of cash acquired, as well as the real estate of more than half of the 350 stores in Serbia and seven distribution centers.

Delhaize will finance the purchase from cash holdings and existing credit lines, Geert Verellen, head of investor relations, said by telephone. The Belgian grocer had 784 million euros of cash and short-term investments on Sept. 30 and net debt amounted to 1.82 billion euros, or 38 percent of shareholder’s equity. The company reports fourth-quarter earnings on March 10.

Investment in Serbia

It’s also the largest transaction in Serbia since Fornebu, Norway-based Telenor ASA paid 1.51 billion euros for mobile-phone operator Mobi 63 in 2006, the Balkan country’s biggest state-owned asset sale, according to data compiled by Bloomberg. Privatizations brought in about 860 million euros for all of last year.

Belgrade-based Delta Holding is the largest private employer in Serbia, with holdings in real estate, retail and food distribution. Its annual sales equal about 9 percent of the country’s gross domestic product.

In a February interview, Delta spokeswoman Jelena Krstovic said the holding would sell half of its stake in Delta Maxi Group to “relax borrowing needs.”

Delta owner Miskovic entered the Forbes list of billionaires in 2007 and has been ranked among the wealthiest people in eastern Europe, with an estimated wealth of $2.8 billion, according to research from Forbes and Polish magazine Wprost.

Geographical ‘Fit’

“Delta Maxi is a perfect fit geographically between Greece and Romania and in terms of strategy, with its multi-store format,” Pascale Weber, an analyst at KBC Securities NV in Brussels who recommends buying Delhaize shares, wrote in a note. “The price tag might seem steep at first sight.”

Delhaize, which forecast annual cost savings of at least 16 million euros starting in 2014, said it’s paying about 0.68 times 2011 revenue, less than the average of 0.84 times of 23 transactions in southeastern Europe between 2006 and 2009, according to a presentation posted on its website.

Lazard Ltd., Bank of America Corp. and Raiffeisen Bank International AG advised Delhaize on the transaction. CMS acted as legal adviser.

To contact the reporter on this story: John Martens in Brussels at

To contact the editor responsible for this story: Angela Cullen at

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