Turkish M&A Resistant to Credit Crunch in the First Half

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1 Corporate Finance Mid-year 2008 Turkish M&A Resistant to Credit Crunch in the First Half In the first half of 2008, M&A activity in Turkey was around US$11 billion 1 through 92 deals. While serious concerns regarding effects of the global credit crunch as well as the closure case in the Constitutional Court against the ruling party AKP remain intact, they seem not to have diminished M&A activity and investors drive to invest in Turkey so far. Nevertheless, investors continue to be cautious in the short term. In the first half of 2008, investments into Turkish companies persevered against all odds. Battling the credit crunch on a global level, while having to face the uncertainty raised by the judicial process in the Constitutional Court regarding the closure case of AKP, Turkish M&A nonetheless pulled through. Partly due to the credit crunch, funds focus shifted from developed countries towards developing countries; this may be construed as one of the drivers for the prospering first half of Turkish M&A. Such M&A activity is primarily noteworthy in its confirmation of Turkey s continued perception as a country to invest in, where expectations for significant growth are still valid. Out of 92 transactions in the first half, 52 had a disclosed deal value, adding up to US$10.1 billion. Considering the anticipated value of deals with undisclosed values, total M&A volume was around US$11 billion in the first half of (2007 first half c. US$10.5 billion, 2007 full year c. US$21 billion). Furthermore, during the drafting of this report in July, two electricity distribution regions have been privatized for a consideration of US$1.8 billion. 1 Includes estimates for deals with undisclosed values.

2 Investor Origin Against foreign investors 57 transactions in the first half of 2008, Turkish acquirers made 5 purchases worth US$2.8 billion. Top Deals Billion dollar deals took place again in the first half. Largest deals were: Acquirer Target Stake Acquired Deal Value (US$m) British American Tobacco (BAT) Tekel Sigara 100.0% 1,720 BC Partners - DeA Capital - Turkven Private Equity Migros Türk 50.8% 1,700 Global Yatırım Holding - Energaz - ABN Amro Consortium Başkent Doğalgaz 100.0% 1,610 As in previous years and in line with our expectations, 75% of the deal value in the first half of 2008 was generated by foreign investors. We observed that European investors had the leading role. (c. 80% of foreign investors deal value) The transactions above made up 5% of the total deal volume in the first half of 2008, whereas top ten deals accounted for 75% of the total deal value. The largest transaction was a privatization. Average deal size in the first half of 2008 was c. US$120 million similar to There were 5-0 deals in the mid-cap segment, adding up to a deal value of c. US$2.5 billion and representing c % of total deal value. The credit crunch seems to have affected American investors. In contrast to 9 transactions in 2007, creditridden U.S.-based investors had only a single deal so far in On the other hand, investors from the Gulf region have remained silent with only a minor involvement in total deal volume. We also observed, although not so much, an increase in the diversity of investors with acquirers from the Far East, India, Israel and Russia getting involved in transactions. 2 BC Partners-DeA-Turkven consortium appears as of UK origin

3 Financial Investors Many global and regional PE firms had started to view Turkey as a key market. Firms with now limited leverage capacity have directed their attention towards emerging markets with growth potential such as Turkey. Financial investors made a deep impact on Turkish M&A activity in the first half of Particularly, Migros, Acıbadem Sağlık and Başkent Natural Gas deals were examples of how keen financial investors are towards the Turkish market. Acquirer Target Stake Deal Value (US$m) BC Partners - DeA Capital - Turkven Migros Türk 51% 1,700 Global Yatırım Holding - Energaz - ABN Amro Consortium Başkent Doğalgaz 100% 1,610 Abraaj Acıbadem Sağlık Hizmetleri 5% 587 Asian Debt Management (ADM) STFA Holding 21% 65 Morgan Stanley & Co Int. Plc Ege Seramik 17% 27 M1 Group (Najib A. Mikati) Keyland Hotel 100% 12 Esas Holding Peyman Kuruyemiş 0% 11 Swicorp Step Halıcılık ve Mağazacılık % 7 Gryphon Mobilera N/D N/D Turkven Tekin Acar 50% N/D Ashmore European Founders Fund Arzum Kucuk Elektrikli Ev Aletleri N/D N/D Yemek Sepeti Elektronik Iletisim 20% N/D RP Capital Bimeks 9% N/D UniCredit Martur 20% N/D Manara Investments ACT Airlines 21% N/D Actera News Outdoor Turkey N/D N/D Vedat Alaton (Private Investor) BMS Endustriyel Temizlik Restorasyon N/D N/D Ashmore Exotic Meyve Suları N/D N/D Total,018 N/D: Not Disclosed During the first 6 months of 2008, financial investors engaged in a total of 18 transactions adding up to US$.2 billion (including estimates for deals with undisclosed values). This represents c. 8% of the deal volume in the first half and also is more than 1.5 times the volume generated by financial investors throughout the whole of Hot Sectors M&A-active sectors in the past five years such as financial services, food and beverage, services, media, retail and energy remained to be the most active in 2008 as well. This year, privatizations carried the energy and tobacco sectors up in the rankings. (Başkent Doğalgaz sale, although a share sale by the Municipality, is considered a privatization, for the purpose of this section.) For the first time in a series of years, the energy sector outperformed the financial services sector in terms of deal value and ranked first with deals, exceeding a total value of US$2.1 billion (excluding deals with undisclosed values). The single BAT Tekel Sigara privatization transaction in the tobacco sector was enough to carry the sector up to second place in the rankings, with a deal value in excess of US$1.7 billion. Moreover, there were 15 deals in the financial services sector with a combined value of just above US$1.7 billion (excluding deals with undisclosed values). This value is around US$2 billion, including estimates for deals with undisclosed values. Retail sector, one of the most M&A-active sectors of 2007 with 12 deals, remained at a standstill in the first half of Deal Number Financial Services Services Food & Beverage Media Healthcare Retail Energy Manufacturing Automotive Parts IT Mining Cement Other Deal Value Energy Tobacco Financial Services Retail Cement Healthcare Infrastructure Media Textile Real Estate Heating and Cooling Food & Beverage Other (US$ million) , ,720 1,712 1,707 2, ,000 1,500 2,000 2,500 27

4 Deal List (January 1 June 0) # Acquiror Origin Target Sector Stake Deal Value (US$mn) 1 British American Tobacco (BAT) UK Tekel Sigara Tobacco 100.0% 1, BC Partners DeA Capital Turkven UK Migros Türk Retail 50.8% 1,700.0 Global Yatırım Holding- Energaz-ABN Amro Consortium Turkey Başkent Doğalgaz Energy 100.0% 1,610.0 Sibirskiy Cement Russia Set Italcementi Group Cement 100.0% Abraaj UAE Acıbadem Sağlık Hizmetleri Healthcare 5.8% 586.7(*) 6 AXA Group France AXA Oyak Holding Financial Services 50.0% Ankara Doğal Elektrik Üretim's 9 7 Zorlu Enerji Turkey Power Plants Energy N/A Allianz Germany Koc Allianz Sigorta Financial Services 7.1% Groupama France Güven Sigorta Financial Services 100.0% 282.5(**) 10 Groupama France Güven Hayat Financial Services 100.0% (**) 11 Allianz Germany Koç Allianz Hayat ve Emeklilik Financial Services 9.0% Çelebi Holding Turkey Bandırma Port Infrastructure N/A ING Group Netherlands Oyak Emeklilik Financial Services 100.0% Titan Cement Group Greece Adoçim Çimento Beton Sanayi Cement 50.0% Ceynak Lojistik Turkey Samsun Port Infrastructure N/A Doğuş Holding Turkey Kral FM and Kral TV Media N/A Miroglio Italy Ayaydın Group Textile 50.0% Frigoglass Greece SFA Soğutma Sanayi Heating and Cooling Equipment 86.0% Manag Gayrimenkul Turkey Atakule Gayrimenkul Yatırım Ortaklığı Real Estate 51.0% Credit Suisse Switzerland Lider Faktoring Financial Services 9.0% 7.6 Asian Debt Management 21 (ADM) Hong Kong STFA Holding Construction 21.0% Bank Hapoalim Israel Bank Pozitif Financial Services 7.5% Bekaert Belgium Beksa Çelik Kord Automotive Parts 50.0% Hygeia Greece Şafak Hastaneleri Healthcare 50.0% Eczacıbaşı İlaç Turkey Monrol Nukleer Urunler Tic ve San Pharmaceuticals 50.0%.1 26 SK Networks Korea Daiyang Metal Sanayi Iron & Steel 0.0% 7.8 Unmaş (Uno Ekmek) and Doruk 27 Fresh Cake Gıda Turkey (Komşu Fırın) Food & Beverage 50.0% Koza Group Turkey Kanalturk Media 100.0% Morgan Stanley & Co Int. Plc UK Ege Seramik Ceramic Tiles 17.2% IMSG Russia Elektrik İletişim Media 100.0% Ada Metal Turkey Demrad Döküm Iron & Steel 100.0% Ihlas Madencilik Turkey Pomza Export Madencilik Mining N/A 22.0 Yıldız Holding Turkey Kerevitaş Gıda Food & Beverage 51.0% 16.5 Miramar Turkey Lidya Hotel Tourism N/A Anel Telekomünikasyon Turkey Solectron Elektronik Electronics 100.0% Özderici GYO Turkey Uğur Gayrimenkul Real Estate 100.0% M1 Group (Najib A. Mikati) Lebanon Keyland Hotel Tourism 100.0% Esas Holding Turkey Peyman Kuruyemiş Food & Beverage 0.0% 11.0 Flap Kongre Toplantı 9 Hizmetleri Turkey Beyaz Filo Oto Kiralama Services 15.7% Alvimedica Denmark Nemed Tibbi Ürünler Healthcare 85.0% Swicorp Saudi Arabia Step Halıcılık ve Mağazacılık Retail.% Xing Germany cember.net IT 100.0% 6. As Çimento Turkey Barit Öğütme Cement 100.0% 5.6 Fuji Heavy Industries Japan Baytur Automotive 10.0% Tolkar Makina Turkey Smartex Manufacturing 100.0%.7

5 # Acquiror Origin Target Sector Stake Deal Value (US$mn) 6 Ihlas Madencilik Turkey Mir Madencilik Mining 99.0%.6 7 Yeşil Enerji Turkey Özarsu Insaat Elektrik Turizm Energy 70.0%.6 CFK Kurumsal Finansman Vakıf Girişim Sermayesi Yatırım 8 Danışmanlık Turkey Ortaklığı Financial Services 1.2% The Morning Star USA Harranova Besi ve Tarım Ürünleri Agriculture and Breeding 10.0% ING Group Netherlands Üniversal Menkul Değerler Financial Services 100.0% Büyükhanlı Family Turkey Öncü Menkul Değerler Financial Services 100.0% Selena FM Poland Polyfoam Yalitim Building Materials 85.0% 1. 5 ISS Facility Services Denmark Sardunya Hazır Yemek Services 100.0% N/D 5 Turkven Turkey Tekin Acar Retail 50.0% N/D 55 Ashmore UK Arzum Kucuk Elektrikli Ev Aletleri Household Appliances N/D N/D 56 European Founders Fund Germany Yemek Sepeti Elektronik Iletisim Services 20.0% N/D 57 Taib Yatırım Turkey PDF Corporate Finance Financial Services 100.0% N/D Kayseri Doğal Gaz Dağıtım 58 EWE Germany Pazarlama Energy 9.9% N/D 59 Legrand France Estap Manufacturing 100.0% N/D 60 RP Capital UK Bimeks Retail 9.0% N/D 61 UniCredit Italy Martur Automotive Parts 20.0% N/D 62 Aegon Netherlands Ankara Emeklilik Financial Services 100.0% N/D 6 Netone Telekom Turkey Turk.net IT 100.0% N/D 6 Manara Investments Saudi Arabia ACT Airlines Transportation 21.0% N/D 65 Zurich Financial Services Switzerland TEB Sigorta Financial Services 100.0% N/D 66 Civitas Greece Global Tanıtım Media N/A N/D 67 Mahle Group Germany Mopisan Motor Gömlek Piston Automotive Parts 60.0% N/D 68 Dhanus Technologies India Borusan Telekom Telecommunications 100.0% N/D 69 Bostik France Tekbau Building Materials N/D N/D 70 Actera Turkey News Outdoor Turkey Media N/D N/D 71 Kıran Holding Turkey Tuzla Tersanecilik Shipbuilding 100.0% N/D 72 Assa Abloy Sweden DAF Kilit Manufacturing N/D N/D 7 Kök Finansal Turkey Standard Yatırım Menkul Kıymetler Financial Services 100.0% N/D 7 Vedat Alaton (Private Investor) Turkey BMS Endustriyel Temizlik Restorasyon Services Not Disclosed N/D 75 Schneider Electric France PKS Profiluks Manufacturing N/D N/D 76 Halcor Greece Sega Bakır Mining 50.1% N/D GTG Eğitim Danışmanlık ve İnsan 77 Trenkwalder Austria Kaynakları Services 80.0% N/D 78 Trenkwalder Austria GUT Temizlik Hizmetleri Services 80.0% N/D 79 ISS Facility Services Denmark Paksil Services 100.0% N/D 80 Ashmore UK Exotic Meyve Suları Food & Beverage N/D N/D 81 Bahat Sağlık Grubu Turkey Özel Gaziosmanpaşa Hastanesi Healthcare 50.0% N/D 82 A.P. Moller - Maersk Group Denmark Maersk Denizcilik Transportation 0.0% N/D Yaşar Basf Otomotiv Boyaları 8 BASF Coatings Germany Pazarlama Chemicals 50.0% N/D 8 Azelis Luxembourg Tara Kimya Chemicals 100.0% N/D 85 GfK Germany Bileşim International Services 100.0% N/D 86 Gryphon Holdings UK Mobilera Services N/D N/D 87 Koç Bilgi Turkey Kaletron IT 100.0% N/D 88 Adecco Holding Europe Switzerland Adecco Hizmet ve Danışmanlık Services 9.0% N/D 89 Yıldız Holding Turkey Oba Çay Food & Beverage N/D N/D 90 Yıldız Holding Turkey Doğa Bitkisel Food & Beverage N/D N/D Heating and Cooling 91 Munters Sweden Munters-Form Endüstri Sistemleri Equipment 80.0% N/D 92 Rözmaş Metal Turkey Rözmaş Chuo Automotive Parts 50.0% N/D * Deal value includes shares acquired through a mandatory tender call in the ISE. **Groupama acquired the entire capital of Güven Sigorta and Güven Hayat for a total consideration of US$282.5 million, representing the total value of both transactions. N/A: Not Applicable N/D: Not Disclosed

6 Prospects Despite the promising start to the year, there are concerns regarding the second half of 2008 in terms of M&A activity, due to the unfavorable global economic climate and the delays in investment decisions caused by the recent closure case against the AKP. Nevertheless, we expect the total M&A volume in 2008 to be around US$17 billion. Although preparatory work for some large privatization projects (highways and bridges, sugar factories, national lottery, Halkbank, electricity distribution) have progressed significantly in the first half of 2008, except for some electricity distribution companies, they might not be finalized this year. Therefore, the course of privatization projects in the second half of 2008 will be highly consequential on the total deal volume at the end of During the second half of 2008, energy, services and retail will be among the most active sectors. Private equity firms, having directed their attention from developed economies towards developing economies, consider Turkey as a key market and will continue to invest in Turkey albeit in smaller-ticket transactions in the second half of The slowdown shown by macroeconomic indicators and the global credit crunch are damping expectations for the second half of We expect that investors will therefore show caution in their investment decisions in the months ahead. Together with the delays in investment decisions that occurred during the recent closure case against the ruling party, we expect the result will be a contraction in the number of deals in the remainder of the year. However, the total annual M&A volume will again be noteworthy due to some privatizations as well as some bigticket transactions in financial services, cement and retail sectors. You can always find all Deloitte Turkey reports at For more information: Başak Vardar Partner bvardar@deloitte.com Deloitte Danışmanlık A.Ş. Sun Plaza Dereboyu Sok. No:2 98 Maslak, İstanbul Tel : 90 (212) Fax : 90 (212) Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms. Designed by AEN. Copyright 2008 by Deloitte Turkey. All rights reserved.