Flamingo, a company specialising in IT&C commerce may announce an alliance with home appliance chain Flanco in a matter of days. The purpose of this alliance is a merger, which would create a stronger company with an annual turnover of more than 170 million euros.
Competition in these two sectors is extremely tough and profit margins are dwindling. The two parties hope to improve their business management and profitability through this deal, so that they can present investors with a company worth a total of more than 1.5bn euros, in a much stronger position on the two markets.
Dragos Cinca (Flamingo''s main shareholder) and the representatives of the Swedish investment fund Oresa Ventures (the main shareholder of Flanco) have reached an agreement on the steps to be taken by each party in order to complete the deal, sources on the financial market say. The two companies need to meet certain requirements over the next few months, but there is a possibility the deal could fall through at any moment.
The first step would see Flamingo buy a minority stake in Flanco, the quoted sources said.
Flamingo was floated on the Bucharest Stock Exchange through a sale of shares this summer, an operation whereby it rose more than 12 million euros for a stake of about 22.5%.
At the moment, the market capitalisation of Flamingo stands at 67 million euros at a price per share of 4,700 ROL.
The company sold shares in its IPO at 23,000 ROL. The current price of these shares (4,700 ROL), is the equivalent of 28,200 ROL as the capital was increased by granting 5 bonus shares for every share previously held. Flamingo shares rose by 2.6% yesterday and by 7% over the last week.
Flamingo posted 47 million euros in turnover for the first nine months, with net profits standing at 20,000 euros. Net profits last year amounted to 3.6 million euros against a 60 million-euro turnover.
Flanco posted 3 million-euro net profit against a turnover of 96 million euros last year. It did not release nine-month financials, mentioning only that sales will overshoot the 100 million euro mark in 2005.
Flamingo is worth 67 million euros on the Bucharest Stock Exchange and, according to the quoted sources, Flanco is appraised at 40-50 million euros.
The home appliances retailer has lost ground to its competitors, Altex and Domo, over the last year. Two months ago, Marius Ghenea, Flanco''s chief executive and one of the Flamingo founders from the early nineties, left the company, and Cornel Marian, the man who oversees Oresa Ventures'' operations in Romania, took over.
Cornel Marian would not comment on the information circulating on the capital market about a possible alliance between Flamingo and Flanco. Dragos Cinca owns 61% in Flamingo, according to the latest reports.
"As we are a publicly listed company we are not at liberty to provide privileged information," Flamingo officials stated, also declining to comment further on the matter. zf@zf.ro
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