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BMC Acquisition Could Alter Turkish Armored Market

May. 12, 2014 - 03:45AM   |  
By BURAK EGE BEKDIL   |   Comments
For Sale: Turkey-based BMC makes the Kirpi mine-resistant, ambush-protected vehicle.
For Sale: Turkey-based BMC makes the Kirpi mine-resistant, ambush-protected vehicle. (Turkish government)
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ANKARA — A powerful businessman’s purchase of a failed armored vehicle maker under the government’s disposition may alter business in Turkey’s thriving armored vehicles market, industry sources say.

Businessman Ethem Sancak’s investment fund ES Mali Yatirim ve Danismanlik AS on May 1 bid 751 million Turkish liras (US $359 million) for BMC. Sancak is known to be a close friend of Turkey’s prime minister, Recep Tayyip Erdogan. The government approved the sale May 8. Sancak was the only bidder for the company.

Sancak, who used to mostly operate in the pharmaceutical and health sectors, has recently switched the focus of his business toward “building up a strong presence in the media and defense sectors.” His media outlets are widely known to be pro-Erdogan publications.

Industry sources said Sancak’s entry into the armored market can be a serious challenge to other players, mainly privately owned Otokar and FNSS.

“Sancak must have a good reason to roll up sleeves in a market totally unfamiliar to him. It would not be surprising if some of the government contracts the other players thought would be naturally theirs went to BMC in the future,” one armored vehicles consultant said.

A London-based Turkey specialist said: “This is not good news for the other players, especially in view of Sancak’s political connections.”

The sector’s biggest operator, Otokar, has developed four prototypes for what will become Turkey’s first domestically built main battle tank, but it has not yet signed a production deal.

The company is owned by Koc Holding, Turkey’s biggest conglomerate, toward which Erdogan does not hide his political hostility. Koc’s shipyard, RMK Marine, has lost a nearly $2 billion contract for the construction of six corvettes after a political confrontation with the government. RMK Marine had signed an interim contract for the program.

This year, a fund administered by the government put BMC up for sale. BMC was seized last May due to financial obligations its parent company, Cukurova Holding, failed to fulfill. The group’s debts amounted to $455 million.

BMC manufactures the Kirpi, a mine-resistant, ambush-protected (MRAP) vehicle. The Kirpi is the country’s first locally designed and developed MRAP.

Last year, the Turkish armed forces terminated a contract with BMC for the acquisition of 468 Kirpis. Under a 2009 contract with the Turkish government, BMC produced and delivered an initial 293 Kirpis, but failed to comply with the original delivery schedule.

Procurement officials say that in addition to the 175 Kirpis for the Army, the national police force could order 20 more.

Follow-on orders from the Army and the police are also likely, they say.

The Kirpi can accommodate 13 personnel and can move over any terrain at a maximum speed of 105 kilometers per hour.

In 2011, BMC was in talks to sell scores of Kirpis to Iraq and Afghanistan. Industry sources said they see significant demand for the Kirpi in countries exposed to mine and ballistic threats.

Industry sources predict substantial foreign demand for the Kirpi, including in some Asian and African countries. BMC was planning to launch a special production line for a right-hand drive version of the Kirpi, which would help in the marketing to some Asian countries, including Bangladesh, Indonesia, Pakistan, Malaysia, Sri Lanka and Thailand.

Sancak told reporters on May 1 that he would invest about $500 million in BMC and employ 3,600 people. The company employs 680 people.

He said he was in negotiations “with the relevant agency” of the Qatari government for a potential partnership in BMC. “We are developing a modality in which we, with our Qatari partners, resolve all investment issues,” Sancak said.

A procurement official said that any Qatari partnership could pave the way for new contracts for BMC in Qatar and other Arabian Gulf countries where Turkish armored vehicle makers are big players. ■


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