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UPDATE 2-Swiss firm buys full control of Greek duty free operator as tourism revives

Angeliki Koutantou
Thursday, 12 Dec 2013 | 7:41 AM ET

revives@

* Dufry buys remaining 49 pct in HDF, two years ahead of plan

* To pay 328 mln euros in cash and shares

* Adds to signs of interest in Greek equity investments

ATHENS, Dec 12 (Reuters) - Swiss travel retailer Dufry has agreed to buy full control of Hellenic Duty Free, which runs stores at Greek airports, casting a vote of confidence in the troubled economy - albeit via the booming tourist industry.

Dufry said on Thursday it would buy the 49 percent of Hellenic Duty Free (HDF) it does not already own from Greek rival Folli Follie for about $452 million, exercising an option to buy the stake two years ahead of plan.

HDF, which holds a monopoly on duty free shops in Greece until 2048 and runs 111 shops at the airports plus border crossings and seaports, is profitable unlike many other Greek firms that have been battered by six years of recession.

Nevertheless, the purchase adds to early interest in Greek companies following a debt crisis that nearly pushed the country out of the euro.

"The deal reflects Dufry's confidence in Greek tourism and the company itself, which is a high quality asset that produces revenues," Eurobank Equities analyst Stamatis Draziotis said.

HDF reported sales of 300 million euros in 2012 and the firm expects a double digit percentage rise this year.

After almost going bankrupt in 2012, Greece's fortunes have improved this year thanks to efforts to bring its finances back on track and a bumper tourism season that has boosted prospects for HDF shops.

Greek tourism suffered during the global financial crisis, which kept away some visitors from wealthier countries to the north such as Germany and Britain, along with violence at anti-austerity protests in Greece.

However, northern European economies are largely picking up and Greek protests are ebbing, while competitors such as Egypt, Tunisia and Turkey have suffered from violence or unrest.

This puts HDF in a strong position to capitalise on the rebound in Greek tourism, which expects to see revenues rise 13 percent to a record high in 2014 and help the country finally emerge from its deep recession.

"This deal is a vote of confidence in Greece. It's a vote of confidence in Greek tourism," George Koutsolioutsos, CEO of Folli Follie, told Reuters. "Although the economy and the domestic market is suffering, HDF has not felt the squeeze. On the contrary, they've had record profits and revenues."

GREEN SHOOTS OF INTEREST

Dufry joins other foreign firms sniffing out investments in Greece in recent months as fears of a Greek euro exit fade.

Canadian investment fund Fairfax Holding bought a 5 percent stake in aluminium producer Mytilineos in October for about 30 million euros. It also agreed to raise its stake in property developer Eurobank Properties.

Greece also pulled off the privatisation of its betting monopoly OPAP by selling a controlling stake to Czech-Greek fund Emma Delta for 652 million euros in October.

Greece agreed on Wednesday to unfreeze a 7.6 billion euro toll road project, reviving what was the biggest foreign investment in the country until it was halted by the debt crisis three years ago.

Dufry, which runs shops catering for tourists around the world, bought a 51 percent stake in HDF in 2012 for 200.5 million euros, with the option of acquiring the remaining 49 percent in 2016.

It will pay for the remaining stake with a combination of 175 million euros in cash and shares worth 153 million euros, which Koutsolioutsos said would give Folli Follie a roughly 4 percent stake in Dufry.

"We are optimistic about travel retail and traffic. We believe that this is an upbeat market, globally," said Koutsolioutsos, whose firm sells luxury goods in Greece and 27 other mainly Asian and European countries from over 800 shops.

"People will travel more and more and will spend even more in airports, regardless of how the economy fares in each country."

Dufry said it is planning to refurbish and expand retail space at leading airports in Greece, where HDF generates more than 80 percent of revenue. It expects to achieve 10 million euros in savings from the deal.

Dufry said it signed a 500 million euro, five-year loan with a group of banks to finance the cash portion of the deal and to repay 335 million euros of HDF's debts with local banks in Greece.