A toast to Turkey from TPG

The San Francisco-based firm will invest in a Turkish alcoholic beverage maker in the first of what it says will be many investments.

Texas Pacific Group and Nurol-Limak-Özaltin-Tütsab, a Turkish consortium which owns Mey Alcoholic Beverages, have entered an agreement for a joint investment in the beverage maker.

Raki is considered the ’unofficial drink’ of Turkey

Mey Içki is one of the leading producers of alchohol in Turkey, and is the nation’s leaders in production of Raki, the country’s unofficial national drink. Mey has an 80 percent market share for the popular drink, which is usually fermented from grapes and is similiar to other local drinks in the Eastern Meditteranean and Balkans. The drink is generally drunk with equal parts water, and when the two are mixed it becomes white, giving it its nickname Aslan Sütü, or Lion’s milk.

Mey is also a market leader in the production of vodka, cognac, brandy and gin. It is also Turkey’s only producer of liquor.

TPG said it is not releasing any further details until after the transaction closes in late Spring. However, the Turkish newspaper Milliyet reported earlier this month that the company would be sold to TPG for $1 billion (€826 million). Other reports earlier this year had also claimed that Mey was considering an IPO.

Mey was established by Nurol-Limak-Özaltin-Tütsab in February 2004 following the privatisation of state-owned spirits monopoly Tekel, after the coalition purchased the alcoholic drinks units of the company. Tekel is still affiliated with the government and the pricing of all alcoholic drinks is determined by the government. However, the distribution of all Tekel products was privatised.

According to a 2005 report by Euromonitor International, sales of alcoholic beverages in Turkey have skyrocketed over recent years. In 2004, sales of alcoholic drinks were worth $6.1 billion, an increase in value of 56 percent over the review period of 1999-2004. The report attributes the rise to the increasing younger generation in Turkey, growth of urbanisation, increased disposable incomes and a greater interest in Western lifestyles.

The report concluded that wine sales were the highest growing area, with sales increasing by 37 percent in 2004 over the previous year.

Although TPG has made investments in alcohol before, including Beringer Wine Estates, this is its first investment in Turkey.

“The investment is the first of hopefully several by TPG in Turkey and is a reflection of the great progress of the Turkish economy in recent years,” TPG partner Stephen Peel said in a statement.

Foreign investment in Turkey, which is targeting 5 percent economic growth this year, has increased sharply since the country launched talks for European Union membership in October 2005.