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How the Domuschiev brothers raised in Communist-era Bulgaria went from selling shoes to controlling a $4.2 billion empire ranging from animal health and shipping to real estate and soccer.
Last year, millions of people working from home drove a pet-buying boom that pumped up the sales and profits of companies peddling kibble and chew toys. The pandemic has also renewed a focus on the potential for animal-borne diseases, as well as antibiotic resistance from contaminated food, boosting the global $20 billion livestock health sector.
“Now that we’re more familiar with zoonotic diseases, there’s a long-term trend for higher production of (animal) vaccines,” says Citigroup analyst Navann Ty.
One of the winners has been Sofia, Bulgaria-based Huvepharma, the world’s sixth-largest livestock health firm, with operations stretching from a vaccine factory in Lincoln, Nebraska to a pharmaceuticals plant in northwestern Italy. A major producer of veterinary medicines and vaccines as well as additives for livestock feed, Huvepharma posted $658 million in revenues in 2020, up 21% since 2018. That’s helped its owners—brothers Kiril and Georgi Domuschiev—become Bulgaria’s first ever billionaires. Kiril was also made an honorary citizen of Nebraska in 2019 for Huvepharma’s investments in the Cornhusker State.
From a nondescript office building in the Bulgarian capital of Sofia, the Domuschiev brothers have built their multibillion-dollar empire by privatizing state-owned firms and expanding them. Starting with the fall of communism in the 1990s and kicking into gear in the 2000s as Bulgaria entered the European Union, the two brothers have turned a string of investments in these privatized firms, including Huvepharma, into an estimated $4.2 billion fortune that also has interests in real estate and soccer.
Forbes
For Kiril Domuschiev, 52, taking over underperforming state assets is always a surer bet than investing in stocks: “We are not people who keep cash in the bank or buy shares on the stock market. For me, [that’s] betting,” he says in a Zoom interview from his office in Sofia, dressed in a crisp white dress shirt. “We prefer to invest in our projects, where we can control things.”
Forbes estimates that Kiril and his younger brother Georgi, 49, each have a $2.1 billion fortune, made up of equal stakes in their jointly owned conglomerate, Advance Properties, plus cash from past sales and dividends.
Advance’s next-largest asset after Huvepharma—which makes up 77% of the brothers’ fortunes—is a 70% stake in bulk cargo shipping firm Navibulgar. That business has also benefited from pandemic-driven disruptions; prices for commodities such as steel and coal have climbed as shipping bottlenecks pile up around the globe, sending revenues soaring for companies that move commodities in bulk. Navibulgar’s sales are expected to grow 78% this year to $281 million. “Rates have gone up to 12-year highs. The industry is in a very, very good place right now,” says Randy Giveans, a shipping analyst at Jefferies.
Little known to most of the world, the Domuschiev brothers are household names in their home country of 6.9 million people: they own the most successful soccer team, Ludogorets Razgrad. Advance Properties also holds a 44-year concession to operate the Black Sea port of Burgas and 2.7 million square feet of real estate across Bulgaria. They also controlled the largest media network, Nova TV, before selling it in January for $340 million
Flush with cash from the Nova sale and seeking to take advantage of an ongoing IPO frenzy, the brothers had planned to take Huvepharma public on the Amsterdam stock exchange in June, hoping to raise at least $340 million at a valuation of at least $4 billion. But at the last minute, they pulled out and chose to keep the firm private. “The discount to secure a successful IPO [was] too high to justify going public,” says Kiril.
The brothers say they have no need for the public markets, at least for now. “Frankly, our philosophy was always to reinvest our profits,” says Kiril.
A bulk carrier operated by Navibulgar at the Port of Murmansk in Murmansk, Russia.
Bloomberg
Born in Communist-era Sofia at the turn of the 1970s, the Domuschiev siblings attended foreign-language schools—Kiril learned Spanish; Georgi studied French—while their parents worked upper middle-class jobs. Their father served as director of Sofia’s electricity department and their mother as a finance director at an energy firm.
In 1990, Kiril Domuschiev was a 21-year-old college student at the Technical University of Sofia—fresh out of mandatory military service—when Bulgaria’s communist regime collapsed and the country began a chaotic transition to a market economy. He recruited his brother and together they started selling locally manufactured clothes and shoes. (It would take him 12 years to graduate and get his degrees, a bachelor’s in industrial management and a master’s in marketing, while running the company. “I decided to finish because it was important for my parents,” he says with a chuckle.)
By 1996, the firm had grown to 2,000 workers across factories in Italy and Bulgaria. It wasn’t an easy time to be running a business. Bulgaria had just plunged into a simultaneous banking and currency crisis that led to hyperinflation, peaking at nearly 600% in 1997. “We lost a big part of our capital in 1996,” recalls Kiril. “There were no banks to finance us. We were young and it was difficult. At the time there were a lot of currency exchanges that had cash, and we borrowed money with a monthly interest rate of 10%-15%.”
That same year, the Bulgarian government began auctioning off state-owned assets, and the Domuschiev brothers sensed a golden opportunity. So they decided to cash out on the shoe business and pooled their profits with undisclosed investors, forming an investment fund called Napredak that acquired around 15 newly privatized companies, including forklift manufacturer Balkan. (While they didn’t own more than 35% of any of the Napredak-owned firms, the brothers still kept the business in the family: they put their mother, Margarita, in charge of Balkan; she’s still at the company today at age 76.)
“With the other founders of [Napredak], we found an opportunity to apply our private business experience to state-owned factories, which were very badly managed,” says Domuschiev, adding that he still believes state-owned companies in Bulgaria are poorly run.
The identity of the other Napredak founders is unclear, but the brothers began investing without them in 2000 when they founded Advance Properties.
That was also the year they bought 54% of partially state-owned animal health firm Biovet for $10.6 million—at a time when the company had about $20 million in annual revenues. They got to work buying new factories, renaming the company Huvepharma in 2005 and later acquiring the rest of the firm for about $9 million. Huvepharma now has 11 plants in four countries, including five in the U.S. in Arkansas, Colorado, Missouri, Nebraska and North Carolina.
As the brothers invested in Huvepharma, they also diversified by betting on the shipping industry, another formerly state-dominated sector in Bulgaria. In 2008, they bought 21% of the state-owned shipping firm Navibulgar, founded in 1892, for $104 million as part of a wider German-led consortium that purchased a 70% stake for nearly $350 million.
The initial timing of the Navibulgar shipping investment—in the wake of the global financial crisis—wasn’t ideal. “One month after we bought [Navibulgar], the shipping industry collapsed,” says Kiril. The brothers later bought out their partners for an undisclosed amount and invested millions in new ships that could navigate around the globe, including the Great Lakes and the Panama and Suez canals. In 2012 and 2013, the brothers doubled down on shipping by acquiring a long-term lease on two port terminals at the Bulgarian port of Burgas on the Black Sea coast, investing $170 million in modernization work and later extending the lease in 2019 through 2065. Today they expect Navibulgar to contribute 30-35% of Advance Properties’ total revenues in 2021. “After many bad years, it’s really booming,” he says.
The brothers’ investment in their soccer team dates back to 2010, when they paid $60,000 for Ludogorets Razgrad, a soccer team languishing in the league’s lowest division and operating out of a city with a large Huvepharma factory. The brothers doubled their investment and built a new stadium the following year. The formerly-amateur team went on to earn two consecutive promotions to reach the country’s top division by 2011, before going on a record-breaking run of 10 consecutive national titles that stretches to the present day.
Ludogorets also earned Kiril Domuschiev one of his more peculiar possessions: a bald eagle named Fortuna, after the Roman goddess of fortune. In 2014, Ludogorets faced off against Italian club Lazio in the knockout stages of the UEFA Europa League. Both sides have an eagle as their symbol, and Lazio regularly flies its own eagle, Olympia, before games at its stadium in Rome. Lazio’s owner Claudio Lotito was so sure of success that he made a bet with Kiril that he would give him an eagle as a gift if Ludogorets won—and they did. “After we eliminated Lazio, I got a present from Lotito,” he says. “So now our eagle is from Lazio.”
Ludogorets Razgrad midfielder Claude Goncalves (R) challenges for the ball in a UEFA Europa League soccer match between Ludogorets and Portugal’s Sporting Braga in Razgrad, Bulgaria in October.
AFP via Getty Images
As the owners of Bulgaria’s most successful sports team and—briefly—its largest TV network, the Domuschiev brothers have found it difficult to stay out of the spotlight in a country still battling corruption. Kiril Domuschiev leads the country’s chamber of commerce, the Confederation of Employers and Industrialists, and also runs a foundation with his wife focused on education and healthcare. In March 2020, he reportedly violated Bulgaria’s pandemic rules when he tested positive for Covid-19 and checked into a private hospital that wasn’t designated as a treatment center for the virus. (In a Facebook post, he said he isolated himself and followed all quarantine measures).
As for the media network, Nova Group, it was by far their most controversial investment. They bought the firm for nearly $210 million in 2019, putting up about 35% in cash and funding the rest through bank financing. The sale was approved by Bulgaria’s antitrust regulator despite its earlier rejection of a bid by the late Czech billionaire Petr Kellner’s (d. March 2021) PPF Group, on the grounds it would have given Nova the funds to increase its market share and limit competition. That fed into accusations that the brothers had close ties with Bulgaria’s long-serving prime minister, Boyko Borisov, who at the time was beset by mass protests that led to his resignation this year. According to a July 2021 report on media freedom in Bulgaria by the European Union’s Centre for Media Pluralism and Media Freedom, the Domuschiev brothers fired more than 60 journalists and staff at Nova’s news channel while it was under their ownership—purportedly due to budget cuts—before allegedly replacing them with more government-friendly reporters from Kanal 3, a news channel they acquired in October 2020 for an undisclosed amount from pro-government oligarch and former member of parliament Delyan Peevski. (In June, Peevski was targeted with sanctions by the U.S. State Department for “engaging in corruption.”)
“Some producers and presenters were resigning on their own, disappointed by the changed context. Some investigative and more critically-oriented journalists were laid off,” says Orlin Spassov, a media professor at Sofia University and one of the authors of the report. Adds his co-author and colleague, law professor Nelly Ognyanova: “The Domuschiev brothers’ business prospered during [Borisov’s] reign. Nova denied every form of censorship…but some critical voices were fired, and Nova acquired [pro-government] media.”
A spokesperson for Kiril Domuschiev denied the allegations in a statement to Forbes: “These are slanders by local businessmen standing behind competing media in Bulgaria and spread by the same media.”
In January 2021, the brothers sold Nova to Netherlands-based United Group for $340 million. Kiril admits the sale was in part due to the political tension generated by their ownership: “I started to receive complaints from all sides because everybody thought that Nova was helping somebody. We liked the business very much—we had become number one in news—but this created really politically sensitive issues and we decided to sell.”
In a typical deal, the Domuschiev brothers invest anywhere between 30% to 50% of the capital directly and finance the rest through bank loans, relying on relationships with international lenders including Citibank, BNP Paribas and the Export-Import Bank of China as well as local institutions such as the state-led Bulgarian Development Bank. When they sell an asset, they don’t need to set up a holding company in a faraway tax haven to reap the rewards: Bulgaria taxes capital gains at a relatively low 10% and dividends at only 5%, compared to the 23.8% top capital gains rate in the U.S. and the average 19.3% rate across the European Union. Forbes estimates that the brothers have pocketed at least $110 million (after taxes) in dividends and proceeds from asset sales since 2018.
It’s clear that the borders of Bulgaria have become too small for the ambitions of the Domuschiev brothers. Navibulgar ships sail the oceans from Indonesia to Israel. Huvepharma makes feed and therapeutics in St. Louis, Missouri and Saint-Étienne, France. And Kiril estimates that Advance Properties is on track to pull in revenues equalling 2% of Bulgaria’s gross domestic product—which stood at $68 billion last year—in 2021, a new record.
“We’re very confident in what we’re doing,” he says. “Everything we’ve touched since 2000 is growing very fast.”