Merinos Goes Public, Reducing SASA’s Debt-to-Equity Ratio
Merinos, the world’s largest manufacturer of machine-made carpets within Erdemoğlu Holding, will go public with the added boost of its new polyester chip facility, which is set to begin operations in October. With the new facility, Merinos’s revenue is set to double and approach 1 billion Dollars, and the offering is intended to be the largest foreign initial public offering in a long time. It is planned that at least two-thirds of the allocation in the Merinos initial public offering will be made available to foreign investors.
A portion of the proceeds from the upcoming initial public offering will be set aside for the refinancing of existing investments within Merinos and for new investments.
In addition, the funds raised through a partial sale of shares will be used by Erdemoğlu Holding’s major shareholders to reduce SASA’s debt leverage.
İbrahim Erdemoğlu, Chairman of the Board of Directors of Erdemoğlu Holding, remarked, "SASA recently weathered a perfect storm of extremely adverse circumstances. There was the war in Ukraine, the earthquake, and macroeconomic instability. Due to these factors, delays caused by the contractor, and downward pressure on sales prices resulting from excess capacity in China, the company’s net financial leverage ratio temporarily rose to as high as 33 times."
Erdemoğlu noted that this ratio was reduced to 16 times by the end of 2025 and fell below 9 times after the results of the convertible bonds were fully reflected on the balance sheet.
Erdemoğlu continued:
"With this action plan, when this leverage is calculated across all debts, it will fall below 6 times, and when the project financing burden ,which is self-guaranteed, is excluded, it will drop below 4 times."
Noting that four foreign and six Turkish brokerage firms have been authorized for the initial public offering, Erdemoğlu said, "With the June 30th balance sheet, we are ready for the initial public offering. We aim to complete the initial public offering before the end of this year."
Erdemoğlu noted that, given the offering’s size and high proportion of foreign allocation, the Capital Markets Board (SPK) may not be affected by the current domestic offering queue, adding that the SPK has taken a constructive approach on this matter.
A Goal of 10-Fold Growth Every 10 Years
İbrahim Erdemoğlu, Chairman of the Board of Directors of Erdemoğlu Holding, stated that the holding’s goal has always been to grow tenfold every 10 years, saying:
"In 1983, our annual revenue was around 250,000 dollars. In 1993, our revenue was 3 million dollars. By 2003, we had reached 30 million dollars. In 2013, we reached 300 million dollars in revenue. By 2023, this figure had risen to 3 billion dollars."
Explaining that this was due to the rules in the family constitution, Erdemoğlu continued:
"The unity and solidarity within our family, along with the rules of the family constitution we established starting in 1990, were the most important factors achieving this. According to this family constitution, shareholders in our family may receive, each year, no more than 10 percent of the total profit our companies generate. Salaries are included in this amount. The remaining 90 percent of the profit must be reinvested in our business. We may take 2 percent, we may take 3 percent, but the total amount received by the entire family cannot exceed 10 percent," he said.
Noting that they may not be able to grow tenfold over the next 10 years due to new investments, Erdemoğlu said, "It will take time for the projects that will take us to that goal to come to fruition. We’ve progressed by continuously transferring technology and knowledge from abroad. Due to the impact of these factors, as Erdemoğlu Holding, we may not have grown exactly 10-fold by 2033. But I can say that we will be far above today’s level and current market conditions."
How will Merinos be valued?
Mehmet Erdemoğlu, Chairman of the Board of Directors of Merinos, stated that during the initial public offering process, Merinos will not be valued as a carpet and flooring company, rather, they have reached a consensus with international investors that it should be valued as an integrated petrochemical corporation with its own end-to-end supply chain.
Mehmet Erdemoğlu had the following to say regarding Merinos’s financials:
"We started with carpets, today, we are transformed into an integrated industrial group spanning from production to raw materials, from chemicals to the global market. You see carpets here, but we’re not actually talking about a company that merely produces carpets. It produces the yarn needed to make carpets itself. It produces the dye needed to dye the yarn itself. It carries out the dyeing process itself. In fact, starting October 1st, it will also begin producing the polyester chips needed to make that yarn. We’ve made an investment of approximately 270 million dollars in polyester chips here. Thanks to the profitability brought by end-to-end integration, our EBITDA margin is higher than that of all companies operating in this sector worldwide."
EBITDA Margin exceeds similar companies
Erdemoğlu made the following remarks regarding the company’s financials and goals:
"While the EBITDA margin for companies operating in this sector worldwide typically ranges between 10% and 12%, at Merinos this figure stands at around 20%. This is made possible by our end-to-end integrated production model. We’re talking about an extremely modern and computerized production structure. You can build new layers of business on top of this for the future. There are certain multiples in the global carpet industry. Given Turkey’s growth story, these multiples might be expected to be slightly higher here. However, the multiples of the companies we use as benchmarks are significantly higher than that. In valuation comparisons, sectors such as chemicals, petrochemicals, and packaging will also be taken into account. In these sectors, multiples naturally start at a much higher level."
Merinos Aims to Exceed 500 Million Dollars in Revenue
Mehmet Erdemoğlu, noting that Merinos produces 80 million square meters of carpet annually, said they closed last year with 472 million dollars in revenue and that this year’s target is to exceed 500 million dollars. Erdemoğlu also noted that the new polyester chip plant, set to come online in October, will generate an additional 400 million dollars in revenue on its own, adding, "Consequently, the combined output of our two plants will propel us toward a revenue approaching 1 billion dollars by 2027."
Noting that the company’s revenue for the first seven months was 270 million dollars, of which 245 million dollars came from exports, Erdemoğlu said, "According to IFRS standards, we have an EBITDA margin of approximately 18% prior to the new investment."
Erdemoğlu noted that the company generated 56 million dollars in EBITDA in the first six months and expects to exceed last year’s figure of 20 million dollars in dollar terms by year-end, adding that the figures will rise even further next year with the new investment.
Erdemoğlu continued as follows:
"Merinos accounts for 95 percent of IKEA’s global machine-woven carpet supply and is also the world’s largest carpet supplier to major U.S. chains such as Walmart and COSCO.
While the company’s largest customer accounts for less than 10 percent of its total portfolio, the top 10 customers together account for 45 percent of total revenue."
Source: BloombergHT
A portion of the proceeds from the upcoming initial public offering will be set aside for the refinancing of existing investments within Merinos and for new investments.
In addition, the funds raised through a partial sale of shares will be used by Erdemoğlu Holding’s major shareholders to reduce SASA’s debt leverage.
İbrahim Erdemoğlu, Chairman of the Board of Directors of Erdemoğlu Holding, remarked, "SASA recently weathered a perfect storm of extremely adverse circumstances. There was the war in Ukraine, the earthquake, and macroeconomic instability. Due to these factors, delays caused by the contractor, and downward pressure on sales prices resulting from excess capacity in China, the company’s net financial leverage ratio temporarily rose to as high as 33 times."
Erdemoğlu noted that this ratio was reduced to 16 times by the end of 2025 and fell below 9 times after the results of the convertible bonds were fully reflected on the balance sheet.
Erdemoğlu continued:
"With this action plan, when this leverage is calculated across all debts, it will fall below 6 times, and when the project financing burden ,which is self-guaranteed, is excluded, it will drop below 4 times."
Noting that four foreign and six Turkish brokerage firms have been authorized for the initial public offering, Erdemoğlu said, "With the June 30th balance sheet, we are ready for the initial public offering. We aim to complete the initial public offering before the end of this year."
Erdemoğlu noted that, given the offering’s size and high proportion of foreign allocation, the Capital Markets Board (SPK) may not be affected by the current domestic offering queue, adding that the SPK has taken a constructive approach on this matter.
A Goal of 10-Fold Growth Every 10 Years
İbrahim Erdemoğlu, Chairman of the Board of Directors of Erdemoğlu Holding, stated that the holding’s goal has always been to grow tenfold every 10 years, saying:
"In 1983, our annual revenue was around 250,000 dollars. In 1993, our revenue was 3 million dollars. By 2003, we had reached 30 million dollars. In 2013, we reached 300 million dollars in revenue. By 2023, this figure had risen to 3 billion dollars."
Explaining that this was due to the rules in the family constitution, Erdemoğlu continued:
"The unity and solidarity within our family, along with the rules of the family constitution we established starting in 1990, were the most important factors achieving this. According to this family constitution, shareholders in our family may receive, each year, no more than 10 percent of the total profit our companies generate. Salaries are included in this amount. The remaining 90 percent of the profit must be reinvested in our business. We may take 2 percent, we may take 3 percent, but the total amount received by the entire family cannot exceed 10 percent," he said.
Noting that they may not be able to grow tenfold over the next 10 years due to new investments, Erdemoğlu said, "It will take time for the projects that will take us to that goal to come to fruition. We’ve progressed by continuously transferring technology and knowledge from abroad. Due to the impact of these factors, as Erdemoğlu Holding, we may not have grown exactly 10-fold by 2033. But I can say that we will be far above today’s level and current market conditions."
How will Merinos be valued?
Mehmet Erdemoğlu, Chairman of the Board of Directors of Merinos, stated that during the initial public offering process, Merinos will not be valued as a carpet and flooring company, rather, they have reached a consensus with international investors that it should be valued as an integrated petrochemical corporation with its own end-to-end supply chain.
Mehmet Erdemoğlu had the following to say regarding Merinos’s financials:
"We started with carpets, today, we are transformed into an integrated industrial group spanning from production to raw materials, from chemicals to the global market. You see carpets here, but we’re not actually talking about a company that merely produces carpets. It produces the yarn needed to make carpets itself. It produces the dye needed to dye the yarn itself. It carries out the dyeing process itself. In fact, starting October 1st, it will also begin producing the polyester chips needed to make that yarn. We’ve made an investment of approximately 270 million dollars in polyester chips here. Thanks to the profitability brought by end-to-end integration, our EBITDA margin is higher than that of all companies operating in this sector worldwide."
EBITDA Margin exceeds similar companies
Erdemoğlu made the following remarks regarding the company’s financials and goals:
"While the EBITDA margin for companies operating in this sector worldwide typically ranges between 10% and 12%, at Merinos this figure stands at around 20%. This is made possible by our end-to-end integrated production model. We’re talking about an extremely modern and computerized production structure. You can build new layers of business on top of this for the future. There are certain multiples in the global carpet industry. Given Turkey’s growth story, these multiples might be expected to be slightly higher here. However, the multiples of the companies we use as benchmarks are significantly higher than that. In valuation comparisons, sectors such as chemicals, petrochemicals, and packaging will also be taken into account. In these sectors, multiples naturally start at a much higher level."
Merinos Aims to Exceed 500 Million Dollars in Revenue
Mehmet Erdemoğlu, noting that Merinos produces 80 million square meters of carpet annually, said they closed last year with 472 million dollars in revenue and that this year’s target is to exceed 500 million dollars. Erdemoğlu also noted that the new polyester chip plant, set to come online in October, will generate an additional 400 million dollars in revenue on its own, adding, "Consequently, the combined output of our two plants will propel us toward a revenue approaching 1 billion dollars by 2027."
Noting that the company’s revenue for the first seven months was 270 million dollars, of which 245 million dollars came from exports, Erdemoğlu said, "According to IFRS standards, we have an EBITDA margin of approximately 18% prior to the new investment."
Erdemoğlu noted that the company generated 56 million dollars in EBITDA in the first six months and expects to exceed last year’s figure of 20 million dollars in dollar terms by year-end, adding that the figures will rise even further next year with the new investment.
Erdemoğlu continued as follows:
"Merinos accounts for 95 percent of IKEA’s global machine-woven carpet supply and is also the world’s largest carpet supplier to major U.S. chains such as Walmart and COSCO.
While the company’s largest customer accounts for less than 10 percent of its total portfolio, the top 10 customers together account for 45 percent of total revenue."
Source: BloombergHT