Target Company Information

MidEuropa, a prominent European private equity firm with significant influence in Central Europe, has announced its decision to sell Profi Rom Food ("Profi" or the "Company"), a major food retailer in Romania, to Ahold Delhaize. The transaction is valued at approximately EUR 1.3 billion pre-IFRS 16 (EUR 1.8 billion post-IFRS 16). Profi is renowned as Romania's leading convenience and proximity supermarket chain, offering a broad selection of high-quality local products to consumers across both urban and rural areas. The Company boasts a network exceeding 1,650 stores and reported revenues of over EUR 2.5 billion for the twelve months ending in June 2023.

Since MidEuropa acquired Profi in 2017, the chain has expanded significantly, becoming the largest supermarket operator in Romania based on store count and one of the country's fastest-growing retailers. During this period, Profi successfully added more than 1,100 stores and achieved sales growth exceeding 3.3 times. This achievement underscores MidEuropa's capability in fostering sustainable development and creating national market leaders through its expertise in retail and technology, as well as its extensive European network and operational enhancements.

Industry Overview in Romania

The retail sector in Romania has experienced rapid evolution, driven by increasing consumer demand for convenience and quality products. With a population approaching 19 million, the Romanian market presents substantial opportunities for retail growth. The supermarket chain sector, in particular, has seen a significant surge in competition and innovation, influenced by changing consumer preferences and the digital transformation of shopping experiences.

Romania’s economy has been showing resilience with robust GDP growth rates, which are contributing to rising disposable incomes and overall consumer spending. The food retail industry, in particular, remains a vital component of the economy, offering considerable prospects for investment and expansion. Major players are enhancing their digital capabilities and logistical frameworks to cater to the evolving shopping habits of consumers, who increasingly favor online and hybrid shopping experiences.

This transformation presents both challenges and opportunities for retailers. Established chains like Profi have successfully navigated this landscape by emphasizing customer experience and product quality while expanding their network rapidly. The competitive landscape is characterized by both local players and international giants seeking to capitalize on the burgeoning opportunities across Romania.

Despite the challenges posed by increased competition and market saturation, the outlook for the Romanian retail sector remains positive. The continued integration of technology in retail operations will further bolster growth, ensuring that consumers receive better services and products tailored to their needs.

Rationale Behind the Deal

The acquisition of Profi by Ahold Delhaize represents a strategic move aimed at strengthening their presence in the Romanian food retail market. This deal not only showcases Ahold Delhaize's commitment to expanding its operational footprint but also highlights the capabilities of Profi as a leading brand within the region. By blending Ahold Delhaize's extensive experience in food retail with Profi's established market position, the combined entity is poised to deliver enhanced offerings to a diverse consumer base.

MidEuropa's successful stewardship of Profi over the last six years has significantly increased the Company's value, making it an attractive investment for Ahold Delhaize. The transaction is perceived as a validation of MidEuropa's strategic execution and an acknowledgment of the growth potential within Romania's retail sector.

Investor Information

Ahold Delhaize is one of the world's largest food retail conglomerates, recognized for its leadership in both traditional supermarket operations and e-commerce. The Company serves approximately 60 million customers each week across its local brands in the United States, Europe, and Indonesia. In Romania, Ahold Delhaize operates a network of 969 Mega Image stores, making this acquisition a move to expand their market presence further.

The synergy created by this transaction will enhance Ahold Delhaize's ability to meet consumer demands across urban and rural regions in Romania. By integrating Profi into its operational framework, Ahold Delhaize aims to leverage the strengths of both companies to better serve the Romanian market.

View of Dealert

The sale of Profi to Ahold Delhaize could potentially be viewed as a favorable investment, aligning with the growth trajectory of the Romanian retail sector. MidEuropa's strategic vision and operational insights have significantly contributed to Profi's evolution into a national champion, resulting in an attractive exit opportunity. The robust performance metrics achieved during MidEuropa's tenure with Profi illustrate that the foundation for continued growth has been firmly established.

For potential investors, the acquisition represents an entry into one of the most dynamic markets in Central Europe, particularly within the food retail segment. Additionally, Ahold Delhaize's experience in enhancing value through its established operational practices could potentially yield further benefits, creating an optimistic outlook for future performance.

However, it is essential to remain cognizant of the challenges posed by increasing competition and the rapid pace of market evolution driven by consumer preferences. Continuous adaptation and innovation will be vital for the success of the combined entity in sustaining its competitive edge and fostering growth.

In conclusion, the acquisition presents a compelling opportunity for Ahold Delhaize to solidify its presence in a burgeoning market while ensuring that Profi continues its trajectory of growth and development. Overall, this transaction could be classified as a strategic win for both parties, contingent on successful integration and continued operational excellence.

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