Balkanpharma

"The two entrepreneurs, Peter Terziev and Georg Tzvetansky, had a pharmaceutical distribution business in Bulgaria, which had been the main pharmaceutical hub for the Eastern bloc in Soviet days. They had markets in eastern Europe, especially Russia, and had put bids in for the privatisation of three of the four state-owned pharmaceutical companies in Bulgaria, advised by Deutsche Bank. While they were raising the funds, the NATO bombing of Serbia began. Every night, the news was full of ‘war in the Balkans’ headlines and these guys were raising money for a company they named Balkanpharma, so they were being rejected by a lot of investment committees at Western institutional investors. I was asked to come and take a look at it to…"

"Meanwhile, almost as soon as we had done the Pharmaco reverse takeover of Balkanpharma we had set about spinning off the Icelandic distribution arm in order to get cash to buy…"

"came up with the idea of reversing Balkanpharma into Pharmaco, simultaneously buying out the bank. To do that we arranged an issue of new shares. At the same time, Deutsche Bank sold more than half of its shares in a deal giving 60 per cent of the combined business to Balkanpharma’s investors. I ended up with just under 40 per cent of the new group and the bank had less than 20 per cent."

"Deutsche Bank, which was advising the entrepreneurs, wanted to invest its own capital through its special situations fund. The bank rules forbade it taking a majority stake, so I set up a consortium of myself, Pharmaco and Deutsche Bank and bought 90 per cent of Balkanpharma, leaving the company 46 per cent owned by me and Pharmaco, 44 per cent by Deutsche Bank and 10 per cent by the Bulgarian entrepreneurs who had brought us the deal. It was difficult building a consortium to put around all…"

"We closed the deal in the middle of 1999 and the whole business became Balkanpharma. Our biggest market by far was exports to Russia, but Bulgaria was also strong. Annual revenues were about $100 million when I became chairman, and by 2000 Deutsche Bank was already looking for an exit. ‘We’ve got a three-year plan but we’d like to see if we can accelerate our exit,’ one of the bankers told me. I was in no hurry. In the year since doing the Bulgarian deal, my father and I had invested in Pharmaco, becoming the largest shareholders. So I thought: ‘Let’s find a way to use the bank to get some cash on the table.’"

"‘Let’s find a way to use the bank to get some cash on the table.’ I came up with the idea of reversing Balkanpharma into Pharmaco, simultaneously buying out the bank. To do that we arranged an issue of new shares. At the same time, Deutsche Bank sold more than half of its shares in a deal giving 60 per cent of the combined business to Balkanpharma’s investors. I ended up with just under 40 per cent of the new group and the bank had less than 20 per cent."