M&A Barometer Romania 2011

Bucureşti - 24 ianuarie 2012 - Ernst &Young announces the publishing of the Romanian M&A Barometer, which summarizes information about the number and value of transactions closed in Romania during 2011, illustrating the most active sectors, the profile country origin of investors. The current edition of the M&A Barometer underlines the fact that the Romanian M&A market did not see a comeback in 2011, but rather continued to reflect significant differences regarding price expectations between sellers and buyers. 2011 reflected a market with small transaction (bellow USD 10m).

"Considering the number of closed transactions, the local M&A market registered a 5% increase in 2011, compared to 2010. We are however in the top of most active countries in Central and South Eastern Europe, with 120 transactions finalized in 2011. Most active sectors during the previous year were production, telecommunication and media, real estate, the energy and mining industry, while strategic investors continued to dominate the transactions market. We look forward to a 2012 much more active than 2011, at least considering the capital transactions and privatizations planned by the Romanian state. Although there is still a consistent interest from strategic investors and investment funds systematically scanning the Romanian market, their size and performance criteria are not always met by the Romanian companies." declared Cornelia Bumbacea, Partner and Director of Transaction Advisory Services department of Ernst & Young.

Introduction

4 Our Barometer captures the number and value of the Romanian market of mergers and acquisitions during 2011, emphasizing the prevailing trends in terms of most active industries, profile and country of origin of buyers.

4 During 2011 the Romanian M&A market experienced a slight increase of 5% in terms of number of closed deals (from 114 deals in 2010 to 120 deals in 2011). However, the size of the market decreased by 28% in terms of extrapolated sum of deal values compared with 46% based on disclosed deal values.

4 The fact that the Romanian M&A market did not “come-back” during 2011 still reflects the significant gap between value expectations of sellers and buyers, as well as the financial tensions in the Euro-zone. Continuing the trend from 2010, insolvent and distressed companies led the way in transactions during 2011. The appetite for takeovers in 2011 was not as strong as envisaged due to the limited economic growth and a low consumer spending in 2011.

Outlook 2012

4 M&A market is expected to record an upward trend in 2012, as long as economic recovery would materialize in Romania. At current times, rumors of upcoming large transactions in 2012 envisage planned privatizations under IMF pressure. However, we do not expect that such transactions would reach completion before the end of 2012.

4 The largest transaction that is expected to be completed during 2012 would probably be the takeover of the Romanian agriculture fertilizer producer Azomures and of its subsidiary Chimpex by Ameropa, as well as the privatization of Cupru Min Abrud (copper mining industry) that is expected to conclude in spring 2012 via open auction.

Estimated market value for 2011

4 Based on our estimates using publicly available data, the extrapolated size of M&A market in Romania decreased by approximately 28% from USD 1,264 million in 2010 to USD 909 million in 2011.

4 Transaction values were disclosed only for 54 deals, resulting in a disclosure rate of 45%, lower compared to last year (i.e. 55%).

4 Total aggregated value of disclosed deals reached USD 383 million in 2011, a 46% drop as compared to USD 712 million during last year. This has also been influenced by a lower disclosure rate year on year.

4 Cross-border deals involving Romanian targets (totaling USD 851 million in 2011) have not been included, otherwise the size of the M&A market would have been much larger.

Type of investors

4 Domestic strategic investors dominated the Romanian M&A market 2011, although the share of financial investors increased from 28% in 2010 to 35% in 2011.

4 In 2011, the number of domestic deals was slightly larger than that the number of deals originated by foreign companies (i.e. 60 domestic deals versus 57 inbound deals). While in 2010 the number of inbound investments outpaced domestic transactions (63 inbound versus 50 domestic).

4 Origination of inbound investments included Germany, Austria and the USA (new entry in top 3 foreign investors by number of deals), each with 6 deals, followed by the UK with 4 deals, and Luxembourg with 3 deals.

2011 sector focus

4 In terms of sectors targeted, Manufacturing was the most attractive sector by number of deals, accounting for 20 deals in 2011. Other leading sectors include Telecom & Media (14), Real Estate (13), Energy & Mining (11), Pharmaceutical and health care, IT and Services (each with 9).

4 In terms of average deal value, Retail & Wholesale sector was the largest, followed by Energy & Mining, Pharmaceutical and Health Care, Real estate and Agriculture.

4 In terms of total disclosed deal values, 5 sectors (i.e. Real Estate, Energy & Mining, Retail & Wholesale, Manufacturing, Pharmaceutical and Health Care) had the highest contributions, covering 73% of the total aggregated disclosed values of USD 383 million.

Largest Romanian IPO in 2011

Value not included in the size of the local M&A market

4 During 2011, the largest initial public offering (IPO) in Romania was the listing on the Bucharest Stock Exchange of “Proprietatea” Fund in January 2011. Total number of shares outstanding as at 30 December 2011 was 13.78 billion and closing value RON 0.4270 per share, resulting in a market capitalization of approximately RON 5.88 billion (or USD 1.76 billion equivalent).

Our dedicated M&A team

4 Our dedicated M&A team offers all services covering deal advisory, from Buy-side and Sell-side M&A to Capital and Debt advisory (dealing with equity and debt raising advisory). We are working closely with our customers and advise them on strategic decisions (disposals or acquisitions), from inception until completion, undertaking the management of the entire transaction process covering a full range of professional services (i.e. due diligence, valuation, business modeling, transaction support and transaction structuring).

European M&A Award

4 London, 18 January 2012: the mergermarket M&A league tables confirmed Ernst & Young as the number one provider of accountancy advice on M&A transactions across Europe during 2011.

Methodology

The M&A Barometer is a summary and analysis of publicly disclosed information accumulated from various databases, including DealWatch and Zephyr. M&A activity and data includes private to private transactions and excludes: Acquisitions of minority stakes below 15% (versus 20%, in the previous issues); Majority shareholder further acquisition of minority interest; Real estate transactions (except for when target and/or buyer was a real estate company or real estate fund); Capital market transactions (except for transactions that resulted in a change of control); IPOs; Acquisitions of licenses; Joint venture agreements; Greenfield investments; Privatizations; Internal reorganizations; Cross border deals (value of these deals was ignored, but the number was counted in).

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