Sources inform ''Globes'' that independent retailer Rami Levy Chain Stores Hashikma Marketing 2006 Ltd. (TASE:RMLI), controlled by chairman Rami Levy, is in talks to buy 40 Mega supermarkets from Alon Holdings Blue Square - Israel Ltd. (NYSE: BSI; TASE: BSI), Israel's second largest supermarket chain.
The companies are waiting for approval in principle from Antitrust Authority director general David Gilo for the deal. The deal's structure will create a kind of collaboration between the supermarket chains, as the proceeds are linked to the branches' performances. For this reason, the deal may not include Mega supermarkets in areas where Rami Levy is active, even if the different supermarkets are not close to each other.
Rami Levy currently has 24 supermarkets, and a 5% share of the market. Mega has 215 supermarkets nationwide, including 70 Mega Bull supermarkets, which are the focus of the pending deal.
The deal comes against worsening results by Mega. Alon Holdings Blue Square's revenue from its supermarket operations fell by 0.6% to NIS 1.63 billion for the first quarter from NIS 1.64 for the corresponding quarter of 2011, and the operating profit fell to NIS 17.2 million from NIS 49.6 million.
However, Alon Holding's fuel and real estate operations resulted in 5% revenue growth to NIS 3.18 billion for the first quarter from NIS 3 billion for the corresponding quarter, although net profit fell to NIS 2.8 million from NIS 37.7 million.
When the financial report was published, Alon Holdings chairman David Weissman said, "The Mega chain is undergoing changes to put it back on track to profits." The remark implied that Mega has a negative balance and that he also intends to do something about it.
Rami Levy's revenue rose 39% to NIS 636.7 million for the first quarter from NIS 485.6 million for the corresponding quarter, its first quarter operating profit was NIS 31.8 million and its net profit was NIS 25 million for the corresponding quarter.
Whereas Alon Holdings Blue Square's operating profit margin from its supermarkets business was 1% of sales for the first quarter, Rami Levy's operating profit margin was 5% of sales.
Alon Holdings said in response, "The company has no intention of responding to gossip on the matter."
Rami Levy said in response, "I have never, and I am not, in talks. None of this is true."
Rami Levy's share price fell 0.9% by mid-afternoon to NIS 109.50, giving a market cap of NIS 1.5 million. Alon Blue Square's share price fell 3.8% to NIS 8.30, after closing at $2.34 on the New York Stock Exchange on Friday, giving a market cap of $154 million.
Published by Globes [online], Israel business news - www.globes-online.com - on June 18, 2012
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