Oyak has $5bn for direct investments

The Turkish pension fund is targeting investments mainly in North America and Europe.

Turkish pension fund Oyak has $5 billion in cash allocated to make direct investments in companies in Turkey, North America and Europe, Oyak Principal Investments manager Hamdi Hafizoglu told Private Equity International.

The fund is currently looking at a transaction that Hafizoglu expects to be completed in the first half of next year.

“We are looking for other investments in the same sector [as its recent acquisition of Almatis] of specialised aluminium manufacturing, as well as other sectors such as chemicals, infrastructure and energy, manufacturing, heavy industry,” he said.

The fund aims to make more than one investment a year, depending on the size. It targets income-generating companies with a stable cash flow, which is key, and good management. The fund is conservative with leverage, typically using three to four times, Hafizoglu said.

In the past three years the fund has focused on investments outside of Turkey. “The markets are active in North America and we can’t find opportunities that fit our investment criteria in Turkey, where most of the opportunities are in retail and we aren’t interested.”

In mid-October the fund announced that it had completed its investment in US biomedical technology start up MicroMedicine, in which it has partnered with three founding doctors and Massachusetts General Hospital.

That investment followed the completion in September of Oyak’s 100 percent acquisition of Dutch speciality aluminium producer Almatis Group from Dubai International Capital (DIC), the private equity arm of Dubai Holding, for an undisclosed sum.

The fund typically targets companies with an enterprise value of $250 million, except for smaller add-on investments, Hafizoglu said.

“We prefer to invest alone, we have the money and the expertise,” Hafizoglu said, adding that it would partner with a recognised name if it does not have previous experience or was investing in a new geography.

In the past, the pension fund has partnered with France’s Renault, with which it manufactures and sells vehicles in Turkey, and German electricity producer Steag to meet 5 percent of domestic energy demand. “These are our two major partners,” he said.

It does not have an exit strategy or hold investments for any specific amount of time. Its last significant divestment was the sale of Oyak Bank to ING, Hafizoglu said. ING acquired the bank in 2007 for $2.7 billion, according to reports.

The pension fund has up to 80 portfolio companies in which it has invested over the past 60 years, Hafizoglu said.

Several of them are market leaders. Almatis is a global leader in the development, manufacture and supply of premium alumina and alumina-based products, DIC said in a statement. Through its investment in Erdemir, Oyak is the largest steel producer in Turkey and the third largest in Europe, according to Oyak’s website.

Oyak is Turkey’s largest private pension fund with 290,000 members and $8.5 billion of assets under management.