Turkey's Otokar Surges as Erdogan Reveals Private Tank Talks

  • Deceased Koc chairman met Erdogan the night before he died
  • Investors speculate on improved relations between govt, Koc

Otokar, a Turkish producer of heavy and military vehicles, rose the most in more than 10 months after President Recep Tayyip Erdogan said he’d discussed the company’s military tank project in private talks with Mustafa Koc, the nation’s leading businessman, one night before Koc died.

Shares in Otokar Otomotiv ve Savunma Sanayi AS, which is 44.7 percent owned by Koc Holding, soared as much as 9.9 percent after Erdogan’s comments. They were 6.9 percent higher at 97.70 liras at the close in Istanbul, on volume that was more than triple the three-month daily average.

The Koc chairman, who died aged 55 on Thursday morning of a heart attack in Istanbul, had met with Erdogan the previous night at the presidential palace in Ankara. The meeting wasn’t made public until after his death, and came after more than two years of strained relations between the government and the conglomerate that contributes about 5 percent of the nation’s gross domestic product.

“Investors feared that Koc’s Altay Tank project could be canceled,” Burak Cetinceker, a fund manager at Istanbul-based Strateji Portfoy Yonetimi, said by phone on Friday. “President Erdogan’s comments today may be interpreted as removal of that risk.”

Canceled Tenders

On Monday, Otokar announced that it had submitted the best bid to produce 250 Altay tanks and to provide their integrated logistical support activities. Turkey has the second-largest military by manpower in NATO, behind the U.S. In recent years, it’s prioritized local production of military equipment including tanks, helicopters and missile systems.

"We spoke about defense industry topics, other steps Koc Group is taking in industry, and commercial relations with neighboring countries," Erdogan told reporters on Friday when asked about his meeting in Ankara with Mustafa and Mustafa’s younger brother, Ali Koc. "You know we gave this Atalay tank project to them. It was during my time as prime minister and they developed it. We evaluated such topics together with the two brothers."

The meeting was a surprise partly because Koc Holding had been previously embroiled in bitter conflict with Erdogan. Erdogan accused Mustafa Koc of supporting mass protests against him in 2013, citing as evidence the fact that one of the hotels owned by Koc had opened its doors to protesters fleeing police tear gas in Istanbul.

Those accusations came after Turkey canceled a Koc tender to build a network of roads and bridges in Istanbul. Erdogan had said the price offered in competitive bidding, $5.7 billion, was "too low." In September of that year, the government canceled another tender won by Koc unit RMK Marine to build ships for the Turkish navy. The group’s efforts to purchase Beta Marina and Pendik Turizm, a tourism company, were blocked by Turkey’s antitrust body last July.

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