Dubai's Abraaj buys majority stake in Turkey's Yorsan Group

Dubai-based private equity investor Abraaj has bought a majority stake in Turkey's fourth-largest dairy company despite the country's political and economic turmoil.

Abraaj, founded by Pakistani businessman Arif Naqvi, is investing in Yorsan Group alongside the European Bank for Reconstruction and Development, while the founding Yoruk family will retain a stake. The transaction values the maker of ayran, a traditional Turkish drink, at more than $300m including debt, according to people with knowledge of the terms.

The investment follows Abraaj's purchase of Fan Milk International, west Africa's largest maker of frozen dairy products, with French yoghurt maker Danone for more than $300m in October. The Middle Eastern group has widened its focus beyond its home region and Turkey across emerging markets following the acquisition of fund manager Aureos in 2012. Yorsan is the group's eighth investment in Turkey.

Omar Syed, managing director at Abraaj, said: "Yorsan is a long established and respected brand in the Turkish dairy sector. We believe the company has great potential to quickly become the market leader in the higher value dairy segment."

Yorsan, which has a plant in Susurluk, about 300km east of Istanbul, produces yoghurt, cheese and milk. Abraaj predicts the group is well positioned to benefit from the "continued conversion from open to packaged products due to rising urbanisation" and "an increasing share of organised retail", which currently stands at 50 per cent of the market in terms of volume.

The move comes amid political turbulence and a sharp decline in the lira, hurting the value of foreign investments. The Turkish currency hit the latest in a series of lows against the dollar on Tuesday after the central bank left interest rates on hold. Inflation is also well above target.

However, Selcuk Yorgancioglu, the Abraaj partner in Turkey, remains bullish: "Our investment pipeline in Turkey remains robust, with the long-term prospects for the Turkish economy continuing to look extremely good."

The group has been scouting for resilient companies benefiting from long term consumer trends and able to pass on price rises to customers, he told the Financial Times.

The transaction may come as a fillip for the country's government, which wants to attract more foreign direct investment to reduce Turkey's dependence on short-term capital flows, which underwrite some 80 per cent of the country's $60bn current account deficit.

Partly because of the economic woes of the EU, traditionally the main direct investor in Turkey, FDI in the country fell from a 2007 peak of $22bn to $11bn for the 12 months to September.

Diplomats and executives say some prospective investors have held off from making fresh investments since mass protests against the government last June, in which Ankara suggested leading Turkish groups had colluded amid an atmosphere of score settling.

A more recent crisis over allegations of large scale corruption and concerns over the rule of law has rocked the country's business world as well as political life.

But much of the outflow from the lira to the dollar and the euro have been from Turkish nationals stocking up on hard currency rather than foreign investors.

In an interview last year, Mr Yorgancioglu praised Turkey's regulatory system as one of the best functioning in the region and lauded the country as an outperformer over the past five years.

He described Turkey as "the next food basket for the region" for both Middle Eastern states and Europe, adding: "That is why you see us [Abraaj] more and more in food and fast-moving consumer goods."

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