FIMI to acquire Gadot Biochemicals for $25m

First Israel Mezzanine Investors Fund (FIMI), run by CEO Ishay Davidi, has acquired 71.5% of Gadot Biochemical Industries Ltd. from Yitzhak Tshuva-controlled Delek Group Ltd. (TASE: DLEKG) for $25 million. The companies signed a non-binding letter of intent, and FIMI has 45 days to conduct due diligence, before signing a binding agreement.

This is FIMI's second acquisition in as many weeks, following the acquisition of Polysack Plastic Industries (TASE: PLSK) for NIS 34.5 million.

Delek will own the remaining 28.5% of Gadot Biochemical, after injecting $10 million into the company and converting Gadot's loans and commercial debts to its current owners, Delek and Oil Refineries Ltd. (TASE:ORL), into equity. Oil Refineries will transfer its minority holding in the company to Delek. Last year, Delek gave Gadot a $49 million owner's loan.

Gadot Biochemical lost $120 million in the past two years, including $103 million in 2011. The heavy losses were mainly due to write-offs on its Chinese joint venture, Jiangsu Gadot Noubei Biochemicals Ltd., which were exacerbated by rising prices for energy and sugar, the raw material for many of its products. Gadot produces and sells ingredients for the food industry: crystalline fructose, citrate salts, and enrichment minerals. More than 95% of the company's production is exported, which is why the company publishes its results in dollars.

Gadot's current liabilities totaled $113 million at the end of 2011, and its long-term liabilities totaled $60 million. Upon taking control of Gadot Biochemical, FIMI will assume its $15 million debt to Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), $18 million debt to the banks, and $40 million debt to bondholders.

The capital injection should turn Gadot's $37 million shareholders' equity deficit into a $30-35 million positive equity. In addition, the changes that FIMI will try to institute into the company should help it achieve operating profit and deal with its debts.

Published by Globes [online], Israel business news - www.globes-online.com - on May 8, 2012