Investors came for Genser. Volga River One Capital Partners have invested in the auto retail business.

Investment funds have developed an interest in Russian automotive dealers. As Vedomosti learned, the Volga River One Capital Partners fund is buying 25% of the shares of Genser. Market players are certain that there will soon be investors for other auto retailers.

The private equity fund, Volga River One Capital Partners is buying additional shares issued by Russian automotive dealer, Genser. After the deal is closed (expected by the end of February) the fund will own more than 25% of the company’s equity, - said Alexey Panferov, Executive Partner, N.R. Growth Consulting (NRG), representing the fund in this deal. According to the terms, Vladimir Pronin, general director of Genser, will become the company’s chairman of management board, and Igor Ponomarev, present financial director, is to be the head of Genser’s board of directors. The NRG representative is going to participate in strategic management of Genser on behalf of Volga Capital. The parties do not disclose the exact amount of share or price until the deal is closed.

Analysts estimate that the fund will pay $25-30 million, judging by company’s turnover and EBITDA margin of 3-4% (average for large Russian car dealers). It is hard to give more accurate figures without knowing company’s debt burden, - noted Alexander Agibalov, AG Capital analyst.

"The money raised through the sale of shares are to finance the company’s development", said Mr.Ponomarev. Mr.Panferov adds that Genser plans to expand its portfolio of brands, including Chinese and Korean, and to lead active regional expansion of dealerships network. "Furthermore, the fund will help us improve corporate governance and increase the company’s financial stability", added Mr.Ponomarev. He explained that current owners of Genser have started preparing the company for the change of management, which is to occur eventually. "This may be a sale of the company to a strategic investor, merger, or IPO", said Mr.Ponomarev. "In 2-3 years Genser must be ready for an IPO", agreed Mr. Panferov.

This was the second large deal in the last two days between investment funds and automotive dealers. On Monday, AIG-Interros Russia Century Fund announced a deal of purchasing 10% stake in "Incom-Auto". Analysts also estimate the deal’s value at $20-30 million. Mr.Ponomarev noted that Genser was also in negotiations with AIG-Interros. As he learned, at least two more deals of the same kind are planned in near future. "Foreign investors also express interest in Russian car dealers", said Ivan Bonchev, a head of division from Ernst & Young. "Their interest is fueled by last year’s 70% growth in domestic market for new foreign cars and the resulting dealer financial performance", said Mr. Agibalov, AG Capital. "Funds that have invested in automotive companies expect to earn profit on resale to foreign strategic investors, or on IPO", assured Gairat Salimov, Troika-Dialog analyst.

The Genser group, the dealer of Nissan, Chevrolet, Opel, Ford, Saab, Cadillac, Hummer and Infiniti, ranks sixth among the largest Russian car dealers. In 2006, the company sold more than 17,000 cars with more than $390 million in turnover. Genser owns six showroom and service centers in Moscow and two regional centers. The company is owned by Igor Ponomarev and Vladimir Pronin on parity basis.

Founded in 2006, the Volga River One Capital Partners fund has made deals in different industries in Russia and the CIS totaling $132 million.
The fund’s investors include Russian and foreign financial institutions and private investors. The fund makes investments in a wide range of industries in Russia and the CIS. The fund’s target investment size for a company is $20-30 million for 3-4 year terms.

Source: "Vedomosti" newspaper, No.26 (1800) 14.02.2007