Haci Omer Sabanci Holdings A.S.

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Haci Omer Sabanci Holdings A.S.

Sabanci Center 4
Lèvent
80745 Istanbul
Turkey
Telephone: (+90) 212-2816600
Fax: (+90) 212-2810272
Web site: http://www.sabanci.com.tr

Public Company
Employees: 31,380
Sales: $5.85 billion (2001)
Stock Exchanges: Istanbul
Ticker Symbol: SAHOL
NAIC: 313210 Broadwoven Fabric Mills; 115116 Farm Management Services; 326211 Tire Manufacturing (Except Retreading); 423110 Automobile and Other Motor Vehicle Merchant Wholesalers; 423690 Other Electronic Parts and Equipment Merchant Wholesalers; 424490 Other Grocery and Related Product Merchant Wholesalers; 518210 Data Processing, Hosting, and Related Services; 522298 All Other Non-Depository Credit Intermediation; 524113 Direct Life Insurance Carriers; 551112 Offices of Other Holding Companies; 561520 Tour Operators

Haci Omer Sabanci Holdings A.S. is one of Turkey’s largest companies, posting almost $6 billion in sales per year. Sabanci’s holdings include some 75 companies—including 13 publicly listed companies—spanning a wide variety of industries. Many of Sanbanci’s holdings are in joint-venture with large foreign firms created in the 1980s and 1990s. At the beginning of the new century, however, Sabanci began to reduce its emphasis on partnerships in favor of pursuing its own international expansion. Sabanci Holding is listed on the Istanbul Stock Exchange, although the company remains controlled at 85 percent by the founding Sabanci family. Nonetheless, the family has taken steps to reduce its direct participation in the company and its holdings since the late 1990s, increasingly turning over operational direction to professional managers.

Sharecropper to Industrialist in the 1930s

Born in 1906, Haci Omer Sabanci represented one of Turkey’s greatest rags-to-riches stories. When Sabanci was five years old, his father died; at the age of 14, Sabanci left his village, Akçakaya, in the Kayseri region, to seek work in the cotton fields of Adana, reportedly making the entire 450-kilometer journey by foot. Sabanci found work as a worker on a cotton plantation. By 1925, Sabanci had begun sharecropping his own plot of land, and by 1932 Sabanci had saved up enough money to invest in a cotton gin, Çirçir Fabrikasi.

With the profits from that investment, Sabanci turned to vegetable oils in the 1943, buying a stake in Turk Nebati Yaglar Fabrikasi, founded in 1925 as the Glido Oil Factory and later to become known as Yagsa. Sabanci continued to seek out investments and in 1946 purchased a second vegetable oil factory. Sabanci grouped his vegetable oil businesses under a new company, Toroslar Trading Company, which formed the first cornerstone of the future Sabanci empire. Toroslar began producing margarine in 1957 under the name Kitchen Margarine; in 1967, the company introduced its Breakfast Margarine brand, which was followed by the launch of Evet margarine in 1973. In that year, Toroslar’s name was changed to Marsa (the “sa,” the initial letters of the word “Sanayi” was by then already a standard feature of Sabanci’s company naming system).

By then, Sabanci had already become a diversified conglomerate. The 1950s had seen a period of strong growth for Sabanci’s interests. In 1949, Sabanci acquired his first farm, Misirli, in Cukurova-Ceyhan. The following year, Sabanci established a combination flour mill and cotton ginning mill, Bossa, to process the company’s crops. By 1951, Bossa’s production had grown sufficiently to set up a textiles subsidiary, Bossa Textiles. Through the remainder of the decade, Sabanci, joined by his five sons, continued to add onto his farming, ginning, and textiles interests, acquiring three more farms, bringing the company’s total acreage to 2,200 acres. The group launched Sapeska Textiles and Soil Products Manufacturing and Trading Inc. in 1958.

Another rising area for the group was the banking and insurance sector. Sabanci entered that market in 1948 with the launch of Akbank—named for Sabanci’s home village—in a partnership with a shareholding group made up of people from the Adana and Kay seri regions. The Sabanci family controlled the majority of the bank and remained its major shareholder at 40 percent even after its later public offering. Akbank grew quickly, opening a branch in Istanbul by 1950; that city became the bank’s headquarters in 1954. By the mid-1960s, Akbank operated more than 100 branch offices. In 1964, Akbank opened its first foreign office in Frankfurt, Germany, following the wave of Turkish “guest workers” emigrating to Germany, the Netherlands, and other European countries. Back home, Akbank’s success led the Sabanci family to enter the insurance branch as well, founding Aksigorta AS in 1960, initially as a subsidiary to Akbank, growing it into the largest non-life insurance company in Turkey.

Sabanci invested in other areas as well. In 1949, he was behind the creation of the Erciyes Palas, a vast complex featuring a hotel, movie theater, shopping center, and restaurant in Adana. In 1954, Sabanci entered the building sector itself, launching the Oralitsa Construction Materials Trading company.

Billionaires in the 1980s

By the time Haci Omer Sabanci died in 1966, the family was already one of the Adana region’s most prominent. Under Sabanci’s five sons and other members of the Sabanci family, the company, reformed as Haci Omer Sabanci Holdings in 1967, was to become one of the largest corporations in all of Turkey.

Sabanci’s sons inherited not only their father’s business talents but also his wide-ranging interests. In 1966, the group launched S ASA Synthetic Fibres Inc., which was followed by the creation of Istanbul Nylon Yarn Inc., later known as Insa, in 1967. These investments led the group to enter the plastics sector in 1971 with the launch of its Pilsa extruded PVC pipe manufacturing company. Another new area of business for the company was the commercial and construction vehicle sector, which Sabanci entered with the creation of Temsa Thermo Mechanical Equipment Inc. in 1968. That company began manufacturing buses as well as acting as a distributor for other truck, bus, and commercial vehicle brands.

The group entered yet another business area, that of cement manufacturing, with the creation of Akcimento Cement Inc. in 1967. Sabanci’s interest in that sector was extended in 1972 with the launch of Cimsa, in Mersin, which began production of white cement in 1975 and later became the world’s leading producer in that cement segment. By then, Sabanci Holding had stepped up its textiles operations as well, forming the Yunsa Carpet and Worsted Products, becoming one of the top five worsted fabrics companies in Europe and the largest in Turkey. The company’s interests in textiles also led it into a related area, that of the production of cords for automotive tires, establishing Kordsa in 1973. From there, Sabanci moved into tires themselves, forming Lassa in 1974 in order to produce tires under license with Bridgestone.

In 1974, Sabanci moved its headquarters to Istanbul and continued to add to its growing empire. In 1976, the company founded its own electronics firm, BIMSA (for Sabanci International Business Information and Management Systems). The company created Cipas Cement Products in that year as well. Sabanci moved into aluminum in 1980 with the purchase of Nasas Aluminum Corp., and in that year also added paper supplies with through a new company, Donkasan.

By the end of the 1970s, Sabanci became interested in the international trade sector and launched new companies Exsa Handels GmbH in Frankfurt, Germany, in 1978 and Holsa Inc. in New York in 1980. Other international moves followed in the new decade with the launch of Ak International Bank (later Sabanci Bank) in London in 1981 and Universal Trading (Jersey) Ltd., which was also based in London.

Sabanci’s growth during this period became marked by a long series of partnerships. Sabanci’s position as one of Turkey’s largest and most internationally oriented companies attracted the interest of a variety of foreign companies attempting to enter the Turkish market, and the company was able to conclude a number of strategic partnerships and joint-ventures to boost its domestic and international position. One of the first of these was with the Netherlands’ Philips, which formed the joint-venture partnership Turk Philips with Sabanci in 1977. The two companies increased their relationship in 1985 with the creation of a second partnership, Turk Philips Illumination Industry and Trade Inc. That year, the company formed its first banking joint venture, with Banque National de Paris, forming BNP-Akbank.

Key Dates:

1932:: Haci Omer Sabanci buys a stake in a cotton ginning mill, Circir Fabrikasi.
1943:: Sabanci buys a share of Turk Nebati Yaglar Fabrikasi, a manufacturer of vegetable oils.
1946:: Sabanci acquires a second vegetable oil plant and forms Toroslar Trading Company (renamed Marsa in 1973).
1948:: Sabanci forms Akbank in partnership with others.
1950:: Sabanci sets up Bossa, a flour and cotton ginning mill.
1951:: Bossa begins the production of textiles.
1966:: Haci Omer Sabanci dies; the company is taken over by his five sons and is soon regrouped as Haci Omer Sabanci Holding.
1968:: The Temsa vehicle manufacturing and distribution subsidiary is created.
1974:: Company headquarters move to Istanbul.
1983:: The company begins a licensing and manufacturing agreement with Komatsu and Mitsubishi through Temsa.
1997:: Danonesa joint-venture with Groupe Danone is established.
1999:: Sabanci University opens.
2000:: Sabanci Museum opens.

The Temsa vehicle subsidiary also grew strongly through partnerships, notably with Komatsu and Mitsubishi, which enabled Sabanci to break the near-monopoly enjoyed in Turkey until then by France’s Renault. Beginning in 1983 and extending throughout the decade, Sabanci signed a number of distribution, licensing, and manufacturing agreements with the two Japanese vehicle groups.

The year 1987 marked a new phase in Sabanci’s growth as it formed a number of major partnerships, including the Dusa yarn manufacturing company, Sabanci’s first partnership with DuPont. That year, the company formed the Beksa joint-venture with Belgium’s Bekeart to produce steel cord and other products for the tire and other industries. In 1988, the company created Brisa in partnership with Bridgestone, which took over Sabanci’s Lassa tire operation. In that year, also, Germany’s Dresdner Bank joined the BNP-Akbank joint-venture, which was then renamed BNP-AK-Dresdner Bank.

By the end of the 1980s, Sabanci family holdings had passed the billion-dollar mark, making the Sabaneis one of the richest in Turkey and establishing Sabanci Holding as one of the country’s top privately held companies. Yet the 1990s were to prove to be a period of still stronger growth for the company.

Going It Alone in the 21st Century

Partnerships remained Sabanci’s vehicle for expansion into the 1990s. In 1991, the company formed its Philsa joint-venture with Phillip Morris to manufacture cigarettes and other tobacco products for the Turkish market. That partnership led to a second joint-venture, this time between Sabanci’s Marsa subsidiary and Philip-Morris’s Kraft Foods, which jointed together to create the Marsa KLS Food Products Manufacturing company in 1993. That move expanded Sabanci’s food production beyond margarine and oils into a wider variety of food products. In 1994, Sabanci took over the marketing and distribution of Philip Morris’s cigarette brands when the two companies formed a new joint-venture, Philip Morrissa.

Sabanci, which had established a number of hotels during the 1990s, formed a joint-venture with Hilton Hotels International in 1993. The company also moved into automotive production and distribution with its Toyatosa joint-venture with Toyota in 1994. While joint-ventures remained an important part of Sabanci’s expansion, the company meanwhile continued to develop its international trading network, notably with the opening of new Exsa subsidiaries in Spain, Italy, and Germany in 1995. The following year, as the Turkish government began a privatization program of the country’s utilities sectors, Sabanci entered the energy market with the launch of its Enerjisa Energy Production subsidiary.

Food products gained prominence in Sabanci’s holdings in the late 1990s, particularly with the formation of the Danonesa dairy and food products joint-venture with France’s Danone in 1997. That year, also, the company made its first venture into retailing, joining with French hypermarket powerhouse Carre-four to form the Carrefoursa joint-venture, which took over Carrefour’s single Istanbul hypermarket and set an objective to open up to 23 hypermarkets by 2002. The company also expected to help fill its hypermarket’s shelves—in 1998, Danonesa became one of Turkey’s leading food products groups with the acquisition of the Tikvesli Company. Another acquisition, this time of Birtat, followed in 1999.

Sabanci’s relationship with DuPont deepened at the turn of the century with the joint acquisitions of a number of industrial yarn and cord producers in South America. The two companies then formed Dupontsa Polyester Europe in 2000, which led the way to the creation in 2001 of Dusa International LLC, “the world’s leading global supplier of heavy decitex nylon industrial yarn and tire cord fabric,” according to the company. Other significant joint-ventures of the time include the Sakosa industrial yarn and cord joint-venture with the U.S. company Koch and Mexico’s Saba, formed in 1998, and the ready-to-wear clothing joint-venture with Britain’s Arcadia, Giysa Sabanci, formed in 1999.

Sabanci was undergoing an internal transformation as it prepared to enter the new century. A McKinsey survey, which revealed that 80 percent of family-owned businesses in developing countries failed by the third-generation of family ownership, convinced the Sabanci family to transition its company to a more professional management structure. Part of that process began in 1997 when Sabanci Holding went public on the Istanbul Stock Exchange. While the S abaneis retained 85 percent of the company’s shares, the move helped ease most of the Sabanci family out of the main management positions within the holding company and its subsidiaries.

The new management in turn took on a more conservative business approach. Whereas the company’s previous investments and diversification decisions had been decided among the family, Sabanci now proceeded through conducting market research. The company also indicated its intention to streamline its extremely diversified holdings, exiting on number of areas of operations. Such was the case with its decision to end its joint-venture with Toyota in 2001, as well as the shutting down of its Philip Morris and Philips joint-ventures in the late 1990s. The company indicated that other sectors of operations, including its textiles holdings, were potentially sell-off candidates as well.

Sabanci’s new management also prepared to reduce the company’s reliance on its joint-ventures and instead to seek more of its domestic and international growth on its own. As part of that effort, the company began acquiring full control of some of its partnerships, such as Sakosa, which became fully owned by Sabanci in 2002. The company meanwhile targeted expansion of its tire and reinforcement-materials divisions—which, under Guler Sabanci, granddaughter of the company’s founder, had grown into one of the sector’s world leaders—with an entry into China and Indonesia in 2003.

Sabanci Holding by then had grown to a company with annual sales worth nearly $6 billion per year. The company took on a new CEO, Dr. Celal Metin, in April 2003. The Sabanci family in the meantime had turned its fortune to philanthropy. In 1999, the group opened its own private university, Sabanci University, promising low tuitions; under family head Sakip Sabanci, son of Haci Omer and company chairman, the group has also created the Sabanci Museum.

Principal Subsidiaries

Akbank (40%); Akçansa; Akkardansa; Aknet; Beksa (50%); Bossa; Brisa; Carrefoursa (50%); Çimsa; Danonesa (50%); Dön-kasan; DuPontsa B.V. (50%); Dusa Interantional (50%); Exsa; Enerjisa; Exsa Deutschland; Exsa (UK) Ltd. (United Kingdom); F. Hefti & Co. AG (Germany); Holsa Inc. (United States); I-Bimsa (50%); Insa; Karçimsa; Kraftsa (50%); Marsa KJS (50%); Olmuksa (50%); Oysa Nigde; Oysa Iskenderun; Philsa (25%); Philip Morissa (25%); Pilsa; Sapeksa; Sabanci Bank plc; Temsa; Turk Notka Net; Universal Trading (Jersey LTD); Yünsa.