An interview with Asli Basgoz of White & Case and Emre Ozsar of GKC Partners about their firms’ work on the CEE 2019 Deal of the Year for Turkey: Sisal’s successful bid to operate the Turkish State Lottery.
CEELM: First, congratulations on winning the Deal of the Year Award for Turkey!
Asli: Thank you for awarding it to us! 2019 was a landmark year for White & Case and GKC Partners in Turkey. In addition to winning the Deal of the Year from CEE Legal Matters, our M&A team had the opportunity to work for exceptional clients (like Sisal) on many other deals. We are honored to have our work and the significance of this deal recognized by colleagues and being selected as Deal of the Year for Turkey. In fact, it was a very active and successful year across our practices, including in M&A, for which the two of us are responsible. We were able to work with clients in sectors including infrastructure, energy, e-commerce, the acquisition of a major quick service restaurant chain and manufacturing. We have a lot of know-how in these sectors and there are sectors in which investors remain interested.
The feedback we get from clients and observers continues to make us happy. For 2019, we were named “Turkey M&A Legal Adviser of the Year” by MergerMarket European M&A Awards and we were ranked as the only Tier 1 foreign law firm in Turkey among all of the global firms in the market by Legal 500. And clients and observers gave us top rankings across all our practices including in legal publications such as Chambers and Legal 500.
Also, 2020 marks White & Case’s 35th year in Turkey, an important milestone for our firm and for Turkey. It demonstrates the firm’s approach to key markets like Turkey: a long-term commitment and belief in Turkey as a very important and strategic market. Accordingly, this year White & Case has promoted Emre Ozsar to partner. His partnership is a reflection not just of his own expertise, hard work, personal successes, and strong client relationships, but of the successful results achieved by our entire M&A team.
CEELM: How did White & Case and GKC Partners get the mandate in the first place – why did Sisal S.p.A choose the firms to assist it in this matter?
Emre: Sisal engaged White & Case based on its experience and reputation in the market and its relationship with CVC Capital Partners. Sisal S.p.A is a portfolio company of CVC Capital Partners. It was a pleasure for our team to work with theirs, as Sisal is experienced (it is the first Italian company in the gaming sector, having started in business in 1945), has innovated in its sector for over 70 years, and approached this opportunity strategically.
CEELM: Can you describe the deal for us briefly, and your firms’ roles in making it happen?
Asli: Milli Piyango is Turkey’s national lottery, first established by law in 1939 and continuously operated by the government since that time. It is an iconic brand, which is known by everyone in Turkey. The Milli Piyango license was transferred in 2017 to the Turkey Wealth Fund. The TWF is the asset-backed development and wealth fund of the Republic of Turkey that was established in 2016. The TWF’s mission is to increase the value of Turkey’s strategic assets to provide resources for Turkey’s primary investments.
This was a challenging task for TWF not only because of the two previous attempts to privatize Milli Piyango but also because this was the first significant commercial project which TWF took in line with its mission.
The TWF wanted to increase the benefit of Milli Piyango to Turkey by maximizing its revenue. It believed that doing that would require investment and innovation in operational performance, including expanding offerings to customers in its retail and online businesses.
The TWF decided to run a competitive auction to offer qualified parties the right to provide ten years of operational services to Milli Piyango. The TWF’s terms required bidders to guarantee a level of financial performance, innovation, and investment in return for sharing in the revenues of Milli Piyango. At the end of the operational period, the TWF would take back Milli Piyango’s operations together with the innovations and investments made by the operator. All the while, the Milli Piyango license, with the rights and responsibilities that come with being license holder, would remain with the TWF.
Emre: Sisal bid in the auction together with a Turkish joint venture partner, Sans Dijital ve Interaktif Hizmetler Teknoloji Yatirim A.S, a subsidiary of Demiroren Holding, through a company they established together called Sisal Sans Interaktif Hizmetler ve Sans Oyunlari Yatirimlari A.S. Sisal Sans was the winning bidder and signed the operational contract with the TWF in August 2019.We assisted Sisal through the entire process, including with the legal, regulatory, and tax aspects of the bidding, negotiation of the operational contract, the shareholders’ agreement between the joint venture parties, and the software and IT services agreement between Sisal and Sisal Sans. We believe our work helped Sisal reach a successful result in its first investment in Turkey.
CEELM: In your submission for Deal of the Year you noted that the Turkey Wealth Fund attempted to privatize the lottery twice before – both times unsuccessfully – leading it to pursue this creative structure, which did not involve privatization. Why was this model more successful than the previous attempts?
Asli: Just to clarify, the previous attempts were made not by the TWF but by the Privatization Authority.
The previous attempts tried to privatize Milli Piyango and required the Milli Piyango license to be transferred to the winning bidder and the bidder to pay to acquire the license and all of the rights under the license for the license period. We think that the structure was challenging because it meant the winning bidder had to finance a substantial upfront license fee before it had any revenue or was certain of the revenue stream. And that meant less financing left over for investment and innovation. Also, license transfer is more difficult from a legal and regulatory perspective.
This structure is innovative because it does not require the operator to acquire the license, only operational rights, and permits the operator pay for those rights through its guaranteed investments and the revenue it guarantees to the TWF. The structure aligned well with the mission of the TWF to increase revenue and innovation in a sustained manner and with the commercial and strategic vision of Sisal Sans.
CEELM: What was the significance of the deal, ultimately?
Emre: We think the deal is significant for many reasons. First, it was the first major commercial transaction undertaken by the TWF after its establishment. Second, it was a competitive international tender that attracted interest from Turkish and international bidders. Third, Milli Piyango was an exceptional opportunity. There are few national operators of lotteries and games of chance of this size and that present this opportunity for operators. Fourth, Turkish consumers who like to play the lottery and games of chance will have access to new numerical games, instant lotteries, and online games across a retail network of more than 10,000 points of sale and online. Finally, the TWF will have increased the value of Milli Piyango, which is a strategic asset in its portfolio, and generated additional revenue and innovation for Turkey during the operational period.
For us, the deal was significant for many reasons too. White & Case and GKC Partners had the opportunity to work on an innovative and important transaction, with a very capable team of professionals at Sisal, to collaborate closely with Sisal’s joint venture partner, Sans Dijital, and to help put together a winning bid and to negotiate a contract that will hopefully benefit our client, the TWF, and, ultimately, Turkey. White & Case and GKC Partners like to do the kind of work that ticks all of these boxes.
We want to thank the entire team from White & Case and GKC Partners: the Istanbul team consisting of Tax Consultant Hakan Eraslan, Competition Advisor Sezin Elcin Cengiz, and Associates Ece Kuregibuyuk, Asli Gulum, Irem Kurkcu and Selin Kaledelen, and the Frankfurt team consisting of Local Partner Michael Leicht and Associate Carola Van Wesel. This deal required teamwork and showcased a strong team from our Corporate, Tax, IT, and Competition practices.