INVESTMENT
PERFORMANCE 
Medifarm - Velebit d.d.

Business Description:
Based in Zagreb, Croatia, Medifarm - Velebit d.d. is a leading pharmaceutical wholesale and distribution company supplying primarily pharmacies and hospitals in Croatia, Serbia, and Slovenia. The company is the exclusive regional sales representative in Croatia for several multinational pharmaceutical companies and holds consignment stock from world leaders such as Aventis, Eli Lilly, Glaxo Wellcome, Novartis and Pharmacia.

Management:
Medifarm is led by Mr. Stjepan Taalan. Mr. Taalan founded the company in 1990 with just $50,000 of capital. Through organic growth, the promise of a loan from one of Croatia's leading banks, and a term sheet signed by a western managed venture fund, Medifarm concluded the acquisition of Velebit, a leading importer of brand name pharmaceuticals. in the midst of the acquisition, the bank decided not to proceed with the loan, causing the venture fund to decide not to consummate the financing. Mr. Taalan and Medifarm subsequently experienced a severe strain on working capital at a time when Croatian hospitals were stretching their payment for pharmaceuticals. With SEAF's help, Mr. Taalan successfully integrated the acquisition and built Medifarm into one of Croatia's leading suppliers of pharmaceuticals. More than 20 percent of the Company's employees hold university degrees.

Investment Thesis:
The company's overleveraged capital structure prevented the business from cross selling products and pursuing growth opportunities intended with the acquisition. SEAF's investment fund in Croatia saw strong value in the business if it could restructure the company's bank loan to provide increased working capital and extend principal amortization of indebtedness incurred from the acquisition.

Performance Summary:
SEAF negotiated a new credit facility that expanded the company's working capital borrowing base, alleviated near-term debt amortization pressure and invested equity capital necessary to put the company on solid financial footing. Within months following SEAF's investment, senior management successfully implemented the original strategy, offering the expanded product line to an increased number of pharmacies and hospitals. Profitability also increased dramatically, enhanced by a new inventory management system implemented with significant involvement of SEAF's technical assistance program. During the fist quarter of 2004, SEAF sold 100% of the shares of Medifarm-Velebit to a subsidiary of Phoenix Pharmahandel AG&Co KG, of Germany, a privately owned company. Phoenix Group has a leading market position in the European pharmaceutical wholesale business and is number two in the industry. The transaction represented for SEAF's shareholders a gain of 2.2 times invested capital and a 30% gross IRR.
 

 

INVESTMENT PERFORMANCE

Medifarm - Velebit d.d.

Business Description:
Based in Zagreb, Croatia, Medifarm - Velebit d.d. is a leading pharmaceutical wholesale and distribution company supplying primarily pharmacies and hospitals in Croatia, Serbia, and Slovenia. The company is the exclusive regional sales representative in Croatia for several multinational pharmaceutical companies and holds consignment stock from world leaders such as Aventis, Eli Lilly, Glaxo Wellcome, Novartis and Pharmacia.

Management:
Medifarm is led by Mr. Stjepan Taalan. Mr. Taalan founded the company in 1990 with just $50,000 of capital. Through organic growth, the promise of a loan from one of Croatia's leading banks, and a term sheet signed by a western managed venture fund, Medifarm concluded the acquisition of Velebit, a leading importer of brand name pharmaceuticals. in the midst of the acquisition, the bank decided not to proceed with the loan, causing the venture fund to decide not to consummate the financing. Mr. Taalan and Medifarm subsequently experienced a severe strain on working capital at a time when Croatian hospitals were stretching their payment for pharmaceuticals. With SEAF's help, Mr. Taalan successfully integrated the acquisition and built Medifarm into one of Croatia's leading suppliers of pharmaceuticals. More than 20 percent of the Company's employees hold university degrees.

Investment Thesis:
The company's overleveraged capital structure prevented the business from cross selling products and pursuing growth opportunities intended with the acquisition. SEAF's investment fund in Croatia saw strong value in the business if it could restructure the company's bank loan to provide increased working capital and extend principal amortization of indebtedness incurred from the acquisition.

Performance Summary:
SEAF negotiated a new credit facility that expanded the company's working capital borrowing base, alleviated near-term debt amortization pressure and invested equity capital necessary to put the company on solid financial footing. Within months following SEAF's investment, senior management successfully implemented the original strategy, offering the expanded product line to an increased number of pharmacies and hospitals. Profitability also increased dramatically, enhanced by a new inventory management system implemented with significant involvement of SEAF's technical assistance program. During the fist quarter of 2004, SEAF sold 100% of the shares of Medifarm-Velebit to a subsidiary of Phoenix Pharmahandel AG&Co KG, of Germany, a privately owned company. Phoenix Group has a leading market position in the European pharmaceutical wholesale business and is number two in the industry. The transaction represented for SEAF's shareholders a gain of 2.2 times invested capital and a 30% gross IRR.