Secondary deal boosts Ukrainian private equity

In a boost to the private equity market in Ukraine, Western NIS Enterprise Fund has successfully exited the country’s leading ceramic brick manufacturer via a secondary buyout.

Confidence in the private equity market in Ukraine is set to increase following the successful secondary buyout of the country’s leading ceramic brick maker.

Western NIS Enterprise Fund has sold its entire 100 percent stake in Slobozhanska Budivelna Keramika (SBK) to Raiffeisen Investment of Austria for $13.5 million. In a statement, Western NIS said it had achieved an exit multiple of two and a half times its initial investment.

The deal is said to represent one of the largest private equity exits in Ukraine and is the first leveraged re-capitalisation. Its is expected to pave the way for further use of buyouts in Ukraine, where private equity activity has been low compared with many other Eastern European countries due to poor corporate governance, an undeveloped financial sector and a low level of investment interest.

“SBK has been a successful investment for WNISEF and we are very pleased to be able to earn an attractive return in line with expectations,” said Western NIS president and CEO Natalie Jaresko. “SBK has made outstanding progress in the marketplace over the past few years and will certainly continue to do so.”

SBK reported net revenues of more than $8.1 million in 2003. It produces premium façade ceramic bricks in 40 decorative shapes ands four colours, and is a leading brand name in the Ukrainian construction materials industry. It operates two production facilities in the country.

Western NIS is the largest private equity fund investing in small and medium-sized enterprises in Ukraine and Moldova, with total capital of $150 million. Launched in 1995 by the US Agency for International Development (USAID), the fund makes individual investments of between $25,000 and $5 million. It has so far invested $85.5 million in 27 companies based in the two countries.            

Raiffeisen Investment (RIAG) is the investment banking subsidiary of Austria-based Raiffeisen Banking Group, which focuses on M&A, corporate finance and privatisations in Central and Eastern Europe.