Mid Europa tucks into Serbian food group

Published: February 3, 2015

Private-equity firm takes controlling stake in Danube.

Mid Europa Partners, a private-equity firm focused on Central Europe, has agreed to buy the company behind some of Serbia’s best-known food brands.

The firm is spending an unspecified amount to take a controlling stake in Danube Foods Group, which with revenues of €400mn (US$453mn) is the largest consumer-goods business in the former Yugoslavia.

The group’s subsidiaries include dairy businesses Imlek and Mlekara Subotica (one of whose mascots, Hose Chokito, is pictured); Bambi, a confectionery producer; and Knjaz Miloš, Serbia’s leading producer of mineral water. Outside of their core Serbian market these businesses also operate in Macedonia, Bosnia and Herzegovina, and Montenegro.

Andrej Babache, a London-based director at Mid Europa who led the transaction, describes the Danube businesses as “a portfolio of crown jewels”. There had been a number of attempts to buy individual businesses or the group before, he tells EMEA Finance, and Mid Europa spent some seven months working with the holding company’s private owners on this deal after a number of investors were approached in early 2013.

“It was a difficult process – these are separate, listed businesses operating in multiple countries and having grown through multiple acquisitions,” Babache says. “There were various layers of complexity that made the dealmaking process protracted. But with the conviction that these are great assets that we can grow in terms of improving their strong positions in their home markets and also take further afield, we we were able to cut through the complexity.”

This is Mid Europa’s second investment in Serbia. In 2007 it took a controlling stake in SBB, a broadband and TV company. In the following five years the firm bought a further 18 businesses across the region to integrate into the SBB group, and in late 2013 agreed to sell it to buyout house Kohlberg Kravis Roberts & Co, making a 3.5-times return on its original investment. Babache, who also worked on Mid Europa’s investment in SBB and its subsequent acquisitions, sees a similar opportunity to build Danube.

“There is consolidation potential for some of these businesses,” he says. “With a platform of this strength across multiple countries, we feel well positioned to capitalise on that. We also think that, as was the case with SBB, there’s opportunity for strong businesses operating in one country in the former Yugoslavia to expand across the region. This business has done some of that but we think there’s plenty more to be done.”