AFTER THE ACQUISITION OF CARGUS FROM DHL "Abris Capital Partners" is looking for investments between 20 and 100 million Euros in Romania

Reporter: When was the opportunity of the investment in "Cargus" discovered?

Cezar Scarlat: I joined "Abris Capital Partners" in May, comning from "Bridgepoint Capital" where I was in charge of Romania and therefore was very familiar with this market. Most of the investment opportunities over herer range from 20 to 70 million Euros, very adequate for a funs such as "Abris". "Bridgepoint" was used to making acquisitions of more than 100 million Euros and as a result, I was a bit "stuck" in making deals, due to the lack of interesting businesses of that size.

Last year, with "Bridgepoint" we indirectly bought the "Polisano" dyalisis clinics for "Diaverum", a company in our portfolio, in a deal which was significantly below this threshold of 100 million. (ed. note: the Vonica family sold the dialysis clinics of "Polisano", through the newly created "Dialmed" SA, to the number two operator in Europe, "Diaverum", owned by investment fund "Bridgepoint").

In < private equity > it is important to invest in areas you are familiar with. When I heard about "Cargus", I realized it was very appropriate for "Abris", which had already invested three times in this sector. Immediately after the move to "Abris", in the month of May, I met Gian (ed. note: Gian Sharp, ex. CEO of "Cargus" and DHL) and we decided to do a partnership for the acquisition of the company. Then we went "full speed" ahead.

For "Abris", it is now the fourth time it is investing in this sector, and this is very important for us. The penultimate acquisition, the "Siodemka" business, in Poland - a market relatively similar to Romania, perhaps more advanced by a few years - is very successful, especially on the "business to consumer" (B2C) segment and we thought we could achieve a similar success. Moreover, we have Gian Sharp and the rest of the management team with us, who know "Cargus" "from every angle". Three other members of the management of DHL have joined us. It is a business which "makes sense" for us, like they say in English.

Reporter: I saw that "Abris" makes investments in companies worth 15 - 45 million Euros.

Cezat Scarlat: I would say that the lower limit is more like 20 million Euros. In think the information on the website refers more to the old fund, which was smaller. The current fund has a value of approximately 450 million Euros. We prefer deals of at least 20 million Euros, we can even go as high as 100 million Euros.

Reporter: How long do you plan on staying with "Cargus" before you make your exit?

Cezar Scarlat: I can tell you that we are here for the long term. We have a deal with DHL for three plus two years, to cooperate on certain aspects of the business, which we can't comment on in detail. We trust the business and this market.

Reporter: How do you approach the business in the companies you acquire?

Cezar Scarlat: In general, we like businesses which are number one or number two in a market, which have potential for growth. We are looking to find the right management for these companies and then we financially and strategically support those managers and the business in itself to help it grow. In the particular case of "Cargus", considering the expertise of the company which we have in Poland, we can transfer a part of the knowledge and practices from that area.

Reporter: You said you are expecting 1-2 deals, next year. In what sectors?

Cezar Scarlat: Generally speaking, we pay attention to many sectors, as long as the companies comply with our criteria. We are not that demanding when it comes to the sectors. But it should be a sector which we understand well and which we have preferably made deals in before. For example, I would never invest in real estate. We've never done this, we don't know how to do it, we are not a real estate fund. We like businesses which involve operations.

Reporter: Can you give us an example of sectors which you already have experience in?

Cezar Scarlat: We already have investments in the production of aluminum alloys, we have two Polish banks, a debt collection company, a clothing retailer etc, and of course retail companies.

Also, you should consider that the people which manage the fund also have years of experience in other funds themselves and have tens of deals under their belt and expertise in various areas.

Reporter: How do you view Romania's investment environment?

Cezar Scarlat: Since we have invested here, it means we are optimistic. Me, as a Romanian, even though I have been away for a long time, I am very confident that things will continue to develop in a positive direction.

Gian Sharp: We are at zero level now. In 2008, we lived through "glorious" times of phenomenal growth, followed by a drop that was just as steep between 2010 and 2011, when everyone was forced to "lick their wounds", but I think that we have overcome the worst moment and that it is now a good time to go into business.

Things are turning around, and some sectors, such as "business to consumer", enjoy annualized growth as high 100% or at least in the double digits. And this is what we are expecting in the coming years.

Reporter: You are very optimistic.

Gian Sharp: I think that the worst is behind us. Let's look at the structure of Romanian businesses. Everyone has undergone restructuring, so the recovery is taking place with much cleaner organizations. We have gone through this process with DHL and "Cargus" and I can tell you that the companies are in a much better shape than they were a few years ago. When you speak to managers of corporations, now, they are not as focused on cost-cutting like they were in the previous years. Two years ago, they were concerned with managing the crisis, they were cutting everything that could be cut.

Cezar Scarlat: We are here for the long term, like I have already said, and we don't get frightened off so easily. We don't see a problem if the economy contracts for another year or two. But we do believe that ROmania is heading towards the moment where it takes its rightful place in the world. It is the second largest country in South-Eastern Europe and that should matter in the long run.

Reporter: How do you view the relationship between the authorities and the political factor?

Cezar Scarlat: We like to believe that the authorities understand the private environment and the benefits for the country in general of investments, such as the ones we are making, because ultimately, they mean jobs and taxes paid to the state budget. That's how things work.

Reporter: Mr. Gian Sharp, you are a co-investor, together with "Abris", in "Cargus". What did this co-investment involve? How much do you own of the company?

Gian Sharp: I can't reveal that. But I have faith in the company, I think it has a bright future ahead of it.

Reporter: What is your target for the businesses of "Cargus"? Where are you starting from and where do you plan to go?

Gian Sharp: Obviously, I know the business very well, I was a general manager, and prior to that, I have also studied it as a businessman, and, as a businessman, I saw the huge opportunity to invest in this company. We are looking to identify the areas where we can develop, to bring characteristics from the Polish market, where there are some amazing solutions, solutions for smartphones, which currently don't exist in Romania. We will adopt the best practices from Siodemka. We will invest in the "business to consumer" segment, which we think will grow exponentially. We have expertise in the "business to business" segment, and of course, we will maintain it.

It all starts with investments. Over the last two years, "Cargus" didn't place much emphasis on investments. The entire fleet will be replaced over the course of two years. We will provide new services and products compared to what we have now. We will invest in rejuvenating the brand, the image of "Cargus".

It is no secret that "Fan Cou-rier" (ed. note: a competitor of "Cargus") did a good job, I admire their work, over the last five years. They have addressed a key market, "B2C", before anyone else did, so we have some catching up to do, but we have good people, a very good management team and we really understand the business.

Cezar Scarlat: I would like to add that when you are part of a corporation (ed. note: DHL), it is very hard to bring in a new product or to change the product strategy. With us, the process is a lot smoother. Just this morning (ed. note: Friday), we had a meeting with a customer, he told us what he needed, and we will "design" the requested service and we will deliver it.

Gian Sharp: And this will happen very quickly, in just a few days or weeks, unlike in a multinational where it takes a lot longer.

Reporter: How will you finance the investments?

Cezar Scarlat: Like I've told you, we have a fund of 450 million Euros. We have the ability not to take money out of the company. The money we generate will be reinvested in development. As an important investor in the region, we have a very good relationship with the banks, and eventually, we could even resort to them in order to bring in more money in the company.

Reporter: What are your targets for turnover and profitability?

Gian Sharp: We have a five year business plan. We have ambitious goals, we don't want to reveal them right now. We want to get the approval of the Competition Council first, and then to launch our plan for the first 100 days and only then show you what we've done and what we are working on.

Reporter: Mr. Cezar Scarlat, how do you view the "private equity" in Romania?

Cezar Scarlat: It's been a bit quiet lately. I think we only had one deal this year. People have uncertainties concerning the market, the global economy, the regulations aren't always the friendliest. I tell my friends that the biggest certainty about Romania is uncertainty (the quick changes in regulation). But we, as a fund, have faith in this market and we will be patient.