Sources inform "Globes" that, in the wake of the public protest over dairy product prices, Bank Leumi (TASE: LUMI) will demand that Apax Partners should disclose figures to it enabling it to carry out a new valuation of food company Tnuva, with the aim of reducing the price of its deal with Mivtach Shamir. The valuation will be a condition for Tnuva's agreement to buy Mivtach Shamir's shares in the company.
"Something has happened in the past two weeks," a source familiar with the matter and close to Bank Leumi told "Globes." "Tnuva is no longer the same company; the price has to change, and the only direction is downwards." The value of Tnuva for the purposes of the deal is some NIS 6 billion (including debt), but the source estimates that Tnuva's value has shrunk by about 10%, and that the price in the deal will have to fall accordingly, "otherwise there will be no deal."
Leumi Partners CEO Yaron Bloch is leading the negotiations with Apax and Mivtach Shamir on behalf of the bank, and Leumi Partners will carry out the valuation. To do so, it will need to receive figures from Tnuva's financials from Apax, which Apax Israel CEO Zehavit Cohen has so far refused to provide. It is believed that Apax will not change its stance that the matter is between Bank Leumi and Mivtach Shamir, and that the bank has all the information it needs in order to make a decision.
Leumi is very concerned at the consequences of the cottage cheese protest for Tnuva. It is clear to the bank's senior management that the freeze on the price of cottage cheese will lead to a loss of revenue and a consequent loss of profit. However, without a valuation, it is not possible to quantify the loss. In addition, it is possible that Tnuva will be forced by pressure from the public and the government to reduce prices of additional products, and that other products are liable to be placed under price controls. "Tnuva's risk premium is rising," sources at Leumi say, "and the risk must be reflected in the valuation of the company and the price of the deal."
In addition, Leumi is concerned that public anger at Tnuva could be directed at the bank if it becomes an owner of the company. "Maybe cottage cheese is just the start," a source close to the matter said.
In the planned deal, Mivtach Shamir, controlled by Meir Shamir, is selling 20.7% of Tnuva, through a sale of 27% of the SPV that controls Tnuva, which Mivtach Shamir owns jointly with Apax Partners. The deal price is NIS 775 million. Under the existing terms, Bank Leumi will pay NIS 387.5 million to buy 13.5% of the SPV, equivalent to 10.35% of Tnuva. The rest of the shares will be sold to private investors.
The deadline for completing the deal was June 15, but the parties have agreed in principle to extend it to August 31.
Published by Globes [online], Israel business news - www.globes-online.com - on July 3, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011