Turkish snack group seeks expansion

Financial Times (UK) Wednesday, January 16, 2013, p. 17

By Daniel Dombey in Istanbul, Henny Sender in New York and Camilla Hall in Abu Dhabi

A Turkish company aiming to introduce the national snack to the rest of the world is seeking hundreds of millions of dollars from private equity groups.

Simit Sarayi, a pastry and tea chain that roughly translates as « bagel palace », is in talks with Los Angeles-based Colony Capital and Dubai’s Abraaj Capital over the sale of a minority stake the company hopes will raise some $500m.

« Simit Sarayi has a target of being a world brand, so it needs an international partner, » said Abdullah Kavukcu, its president, whose interest in selling a stake was initially reported by Turkey’s Hurriyet paper.

Mr Kavukcu said that to achieve his goal he was willing to step down from the management of the company, which specialises in simit , a lighter, sesame-covered bagel equivalent, of which it sells 83,000 a day.

In keeping with Turkey’s more assertive role on the international stage, the company, which has outlets in Cyprus, Germany, the Netherlands and Saudi Arabia, has set itself a mission « to introduce simit to the entire world ». A person close to Colony said: « He wants to be the McDonald’s of the Middle East. »

Until Simit Sarayi opened its first store in 2002, its core product was generally bought from patisseries and wandering vendors. It now has 204 mostly franchised branches and revenues – excluding franchisees’ sales – of TL150m ($85m).

Other people close to the talks question whether a sale of a large stake in the company would net as much $500m. But the people highlight its potential as a way into the Turkish market, still one of Europe’s fastest growing, and as a springboard for possible regional expansion.

Simit is a strong part of Turkish tradition. In his younger, poorer days, Recep Tayyip Erdogan, now Turkish prime minister, sold simit on the street, and Simit Sarayi says it was first made in the 14th century for the janissary soldiers of the Ottoman Empire.

However, Greece traces it back to the Byzantine Empire, in a dispute that parallels disagreements over the origins of baklava.

Such disputes feed into the discussions about Simit Sarayi’s future. While Abraaj hails from the Gulf, Colony argues that it has expertise in the Aegean region and beyond.

Mr Kavukcu, who added that he was also looking at a public listing and local acquisitions, said simit’s appeal was universal. « Simit is loved by everyone, » he says.