AKO established in 1970 by Mr. Abdulkadir Ozcan, acts as the authorized seller of automotive products, mainly tires as well as batteries, chains and wheel rims. AKO is also the authorized dealer of Toyo, Hankook, Maxxis, and Alessio in tires, and the main dealer of Mutlu Aku for batteries and of CMS in wheel rims. AKO, headquartered in Ankara, has 13 branches across Turkey and employs around 400 people. AKO is owned by the Ozcan family. The Board of Directors is represented by family members and chaired by Mr. Mustafa Ozcan. AKO is a growing company with a high level of profitability. Its combined revenues increased significantly from $107 million in 2004 to $193 million in 2006 mainly due to Petlas acquisition in March 2005. Petlas, which is 99.97% owned by AKO, is the fourth largest tire manufacturer in Turkey, following Brisa, Pirelli and Goodyear, with revenues of about $100 million in 2006 of which 50% are from exports. Petlas was established as a state-owned company to produce tires for both the commercial and defense industries in 1976. Petlas has traditionally focused on producing tires for tractors and heavy duty equipment, and positioned itself as the leader in these segments in Turkey. Petlas’ production facility is located in Kirsehir, a relatively less-developed city in central Turkey and employs about 1250 employees.

The total project cost is estimated at $188 million. The proposed IFC investment consists of an A Loan and a syndicated B Loan together of up to $140 million, to AKO. The balance of the project cost will be financed by equity and internal cash generation. IFC is considering and equity investment of up to 10% of AKO’s shareholder equity.

50.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	40.0
Equity	10.0

* These investment figures are indicative

The Passenger Car Radial (PCR) component of the project is situated in Kirsehir. The Truck and Buses Radial (TBR) component of the project will be located in an industrial zone in Central Anatolia.

The project represents an important investment in one of the less developed city in Turkey – Kirsehir, where incentives are provided to attract investment to increase its Per Capita Income – Petlas is the largest employer in Kirsehir providing currently 1250 permanent jobs in the region. The proposed investment program will create an additional permanent employment of about 690 local people at the 1st phase of the project and gradually increase with further expansion projects. The project will also enhance production technology and quality in Petlas plant in Kirsehir, which will in turn improve its efficiency and hence its competitiveness in the industry. In addition, the Project is expected to create increased business opportunities to local suppliers and dealers that distribute its products across the country.

In this proposed transaction, IFC will support the entrance of a local company in a sector which is currently dominated by three established international players. IFC has played and will continue to play an important role in providing: - global technical and sector expertise through technical, managerial and marketing industry best practices helping reducing risks; - long term financing comprehensive package including A loan and B loan as well as advisory services. IFC is also considering an equity investment; - international financial and managerial practices, helping to improve financial reporting and to adopt international best practices.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects. Please refer to the Environmental and Social Review Summary (ESRS), which has the full environmental and social impact assessment.

Specific key environmental and social issues assessed include:

- Social, environmental, health and safety management including aspects of potential construction of new manufacturing plants;
- Involvement in defense sector;
- Handling and storage of hazardous substances;
- Labor conditions;
- Workplace health and safety (exposure control to dust and chemical substances, machine guarding, noise, drinking water supply and other issues);
- Management of wastes, effluents and emissions;
- Consumption of natural resources/Energy efficiency;
- Community, health, safety and security.