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Inside Out: The Mavi IPO

Inside Out: The Mavi IPO

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The Deal: On June 20, 2017, CEE Legal Matters reported that the Esin Attorney Partnership and Baker McKenzie had advised Turkven Private Equity, the Akarlilar Family, and Mavi Giyim Sanayi ve Ticaret A.S., the Turkish jeans and jeans-wear company, on Mavi’s IPO, with White & Case advising underwriters Bank of America Merrill Lynch, Goldman Sachs, and Is Yatirim. 

We reached out to the partners of the Esin Attorney Partnership and White & Case who led their firms’ teams on the IPO for more information.

The Players:

  • Counsel for the Issuers: Esin Attorney Partnership: Muhsin Keskin, Partner at Head of Capital Markets
  • Counsel for the Underwriters: White & Case: Derin Altan, Istanbul Local Partner

CEELM: Muhsin, how did you and the Esin Attorney Partnership/Baker McKenzie become involved with Turkven Private Equity, the Akarlilar Family, and Mavi Giyim Sanayi ve Ticaret A.S. on this matter?

M.K.: In the beginning, this was a dual-track transaction. In other words, the client pursued the trade sale and IPO simultaneously, but decided on the IPO. I think they mandated us for the strength of our corporate finance (M&A and equity capital markets) practice. We assisted Turkven with strong teams in both work streams.  

CEELM: Can you clarify who you were retained by initially?

M.K.: There was an RfP and beauty contest process. Turkven evaluated our offer and credentials and selected us. This was Turkven’s first IPO but they already knew us and had worked with us on the M&A market and they also knew how strong we were on ECM deals. When they decided to proceed with the IPO route, we also advised the issuer (Mavi) and the other shareholder (the Akarlilar family).

CEELM: How about you, Derin? How did you and White & Case become involved with Bank of American Merrill Lynch, Goldman Sachs, and Is Yatirum on this matter? 

D.A.: We were selected as the underwriters’ counsel when the joint global coordinator was appointed. This was before the kick-off of the transaction. We received an RFP from our clients on this deal. The banks reached out to us directly, in particular Goldman Sachs, which was mandated first. We – including me personally – have worked with them before, in many jurisdictions.

CEELM: For our readers who may not be familiar with the process, Muhsin, were you involved in the process of selecting the underwriters and lead arrangers, or did you come on board afterwards?

M.K.: Generally, the lawyers’ mandates follow the banks’. It was no different in this case.

CEELM: And what about you, Derin? When did White & Case get involved?

D.A.: Similar to all IPO transactions, we were not involved in the selection process of the underwriters and we stepped-in once the underwriters were selected.

CEELM: What, exactly, was your initial mandate when you were retained for this particular matter? 

M.K.: To represent Turkven in the trade sale and then represent Turkven, the Akarlilar Family and Mavi in the IPO.

D.A.: We were retained as the underwriters’ counsel. The mandate was in line with customary UW counsel role for Rule 144A ECM deals.

CEELM: Who were the members of your teams on this deal, and what were their individual responsibilities?

M.K.: This was a multi-jurisdictional deal led by me and Esin Attorney Partnership Partners Eren Kursun (Head of M&A and PE), Erdal Ekinci (Head of Tax), and Birturk Aydin (Head of Compliance). We were supported by Associates Caner Elmas, Gunes Helvaci, Sertac Kokenek, Berk Cin, Sait Baha Erol, Erdi Yildirim, Sena Uralcin, and Sena Calın.

The Baker McKenzie team included Partners Mark Devlin and Nikolaus Reinhuber in Frankfurt, Marcel Janssen in Amsterdam, Michael Fieweger in Chicago, Sergei Voitishkin in Moscow, and James Thompson and Nick O’Donnell in London. They were supported by Of Counsel Ross McDonald in New York, Valesca Molinari in Frankfurt, Kim Stouffer in Toronto, Rochelle McAllister in Chicago, Sergey Kapustin in Moscow, Gerard Koster in Amsterdam, and Tom Quincey in London. 

D.A.: Laura Sizemore led the deal on the international side, with Henrikki Harsu assisting as the US associate. In Turkey, I led the team, with Ece Kuregibuyuk assisting.

CEELM: Please describe the IPO in as much detail as possible, particularly from your clients’ perspectives.

M.K.: The offering consisted of an international offering of 16,624,300 shares by Blue International Holding B.V. outside of the United States and Turkey to institutional investors in offshore transactions and to qualified institutional buyers in the United States and a public offering of 7,124,700 shares to retail and institutional investors in Turkey in offshore transactions. 

The selling shareholder sold 3,562,350 additional shares to cover over-allotments. Based on the offer price, Mavi’s total market capitalization at the commencement of trading was approximately TRY 2.14 billion. 

The shares began trading on the Borsa Istanbul on June 15, 2017 under the symbol “MAVI.” With a market capitalization of TRY 2,135,300,000 (TRY 43 per share) and an offering of 27,311,350 shares, Mavi’s IPO is the largest in Turkey since 2013.

Turkven and the Akarlilar Family hold around 45% of the company post-IPO (1/3 of which belongs to Turkven and the rest to the family). Before the IPO Turkven was the majority and the family was the minority.

D.A.: The deal is of particular interest to our clients as it closed as a huge success.

CEELM: What was the most challenging or frustrating part of the process? Why?

M.K.: The deal was challenging in a couple of aspects. The initial plan was to IPO Mavi based on the Q3 2016 financial results. Due to the global political instability following the US elections and its effects on the Turkish economy (including the devaluation of the Turkish lira), the deal was suspended in December. When the economy began to recover in March 2017, the client decided to restart the process based on the year-end financials, which left us very limited time and was our greatest challenge.

We organized a large team of lawyers in several jurisdictions due to Mavi’s group structure and the extent of their international operations. It was quite challenging to streamline the information flowing in from various jurisdictions.

I would like to stress the original dual-track nature of the transaction. When a client is unsure of which direction to take at the outset, the lawyer’s job can be difficult. An IPO timeline is dictated by strict regulations whereas a trade sale is very open-ended, making it difficult to conduct both processes simultaneously.  

D.A.: Although I have some insight, I would refuse to comment on this for obvious reasons. I am a capital markets lawyer, and this is our job. There are frustrating parts, but the deal closed; which is enough to compensate for all difficulties, challenges and frustrations. It is a deal that we work so hard on but does not close that would be frustrating.

CEELM: Was there any part of the process that was unusually or unexpectedly smooth/easy?

M.K.: No. Turkish IPOs are always challenging.

D.A.: Not really. This deal was the first major IPO after certain structural changes to the regulator and regulations, which is always challenging. Looking back, I cannot remember any part that was “unusually smooth.”

CEELM: Did the final result match your initial mandate, or did it change/transform somehow from what was initially anticipated?

M.K.: The result matched the initial mandate. 

D.A.: We were in line with our mandate.

CEELM: What individuals at your clients did you work with, and how did you interact with them?  

M.K.: Our main contacts were Baris Seven and Kerem Onursal from Turkven, who acted as the global deal coordinators. We also interacted with Tuba Pekin, Mavi’s CLO, and Tuba Yilmaz, Mavi’s CFO, and their respective teams to combine the disclosure documents.

D.A.: We had daily interactions with the bankers at Goldman Sachs, Bank of America Merrill Lynch, and Is Yatirim. We also worked closely with Mavi CEO Cuneyt Yavuz, General Counsel Tuba Pekin, and CFO Tuba Yilmaz. With regards to Is Yatirim, we worked closely with Director of Corporate Finance Mete Gorbon. 

CEELM: How would you describe the working relationship with White & Case on the deal?

M.K.: It was not the first time we advised on an IPO with White & Case on the other side; in fact, we have found ourselves in this situation frequently over the last few years, representing both issuers and underwriters. Our teams get along very well. We had several drafting sessions in person but the majority of our communication was by telephone or email.  

D.A.: This deal was a typical IPO deal, therefore it was not confrontational but collaborative. Similar to other IPO transactions, where there is a blurry line between the two sides, the project was run in a very collaborative mode. The project timeline and negotiations were in line with the market practice.  

CEELM: How would you describe the significance of the IPO to Turkey?

M.K.: This deal highlights Turkey’s strong economic programs and the rising interest in Turkish capital markets. It promises to shake up a moribund market for Turkish IPOs, characterized by years of cancelled or postponed sales. This IPO is significant for several reasons. First, it is 2017’s first successful public offering and the largest Turkish IPO in dollar terms since 2013. Second, it is a private equity investor’s first exit through an IPO in Turkey, showing international private equity firms interested in Turkish assets that this exit strategy, which is frequently used in Europe, is also available to them in Turkey. The public float of 55% is among the largest in the Turkish market and sets an excellent example for best corporate governance practices in the Turkish capital markets.

D.A.: This deal was priced at a premium, and is the largest IPO at Borsa Istanbul for 2017, which was actually a dull year for closed IPOs at Borsa Istanbul. I personally believe this deal is a landmark deal which signifies international ECM investors’ interest in high quality Turkish assets.

This Article was originally published in Issue 4.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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