Advent in talks to enter Dufa business

Advent investment fund is in advanced talks for the acquisition of a large stake in varnish and paints producer Dufa Romania, one of the top three players on the market, well placed sources told Ziarul Financiar.

Neither party to the talks had made any comment by the time this edition went to press.

Top varnish and paint companies have been wooed lately by a number of financial and strategic investors keen to enter a business area that offers attractive profits and growth potential.

The market potential is evidenced by the rising level of demand for paint on the Romanian market, which nonetheless has one of the lowest average consumption levels in Europe at only 2.8 kg per person, compared with Hungary”s 9 kg, the Czech Republic”s 12 kg, Germany”s 17 kg and the Nordic states average of over 20 kg.

Advent first approached Dufa Romania last year at a time when several other financial and strategic investors were also expressing an interest in the varnish and paint producer.

Dufa Romania was set up in 1997, when German group Meffert AG established a joint venture for varnish and paint distribution with a group of Romanian investors.

Meffert AG owns 50% in Dufa. The remaining shares belong to Marius Ivan, the general manager of Henkel Bautechnik Romania, and Liviu Stan, the former general manager of Dufa.

Dufa Romania has been a top-three market player for a number of years. The market for varnish and paint is estimated to have annual sales of around 140 million euros.

Dufa faces competition from Kober, a family-run business from Piatra Neamt controlled by Aurel and Mariana Kober, and Policolor Bucharest, a company owned by several investment funds.

Company data show Dufa had a profit rate of 10% and turnover of around 15 million euros in 2004.

At the end of last year the company performed a strategic expansion of its operations onto the market for construction materials centres.

Global Real Invest, a joint venture created by Dufa with German group Interpares Mobau Interbaustoff in which it holds 90%, opened its first construction materials centre in Pipera-Bucharest after investing 5 million euros.

Advent recently announced the creation of a new investment fund for Central and Eastern Europe that has raised 330 million euros from investors. Up to 30% of investments by the fund – a maximum of 99 million euros – will be allotted to Romanian companies. The new fund, called Advent Central and Eastern Europe III (ACEE III), will invest in media, communications, medical services, construction, financial services and retail.