A series of potential buyers are taking an interest in Israir Airlines and Tourism Ltd., which has been up for sale for some time. Those expressing interest include billionaire Teddy Sagi, and investment funds Fortissimo and Apax Partners. The controlling shareholder in Israir is IDB Development via IDB Tourism, a subsidiary. All of those currently interested are Israeli investors.
Overseas companies previously expressed interest, including low-cost Hungarian airline Wizz Air. The Hungarian airline wanted to acquire the entire company in order to strengthen its presence in the Israeli market, which it regards as having great potential. Since then, however, Wizz Air has already established itself in the Israeli market with many routes from Ben Gurion Airport and Ovda Airport.
The Israel Antitrust Authority refused to approve a merger between El Al Israel Airlines Ltd. (TASE: ELAL) (through Sun d'Or) and Israir in early 2018, mainly out of concern about damaging competition on internal flights in Israel between Arkia Airlines Ltd. and Israir. After the merger was struck down, IDB Development hired investment banking services from Giza Singer Even and from Epsilon Underwriting to find a different buyer for Israir. According to reports by IDB Development, the sale of Israir should generate a NIS 225 million cash flow in 2019, representing the balance of the investment in the books. At the same time, by the time this sale goes through, IDB Development will recognize a NIS 30 million profit on a deal recently signed with Ofer Chodorov, owner of Diesenhaus, for the sale of 50% of its incoming tourism activity for NIS 26 million. Completion of this deal requires obtaining the necessary approvals.
Israir was put up for sale a few years ago, but the company has now stepped up its efforts to find a buyer. CEO Uri Sirkis is now daily engaged in a marathon roadshow with potential investors. Offers for Israir are in the $60-70 million range, in accordance with the price tag listed by IDB Development in its cash flow report. The most interesting name on the list of buyers is Sagi, who recently completed the acquisition of Sakal's duty free business for NIS 40 million - his first retail activity in Israel. As part of the deal, Sagi acquired three companies: Sakal Duty Free, Sakal Global Duty Free, and Layam. The combined turnover of these companies, which have a total of 200 employees, is estimated at NIS 200 million.
In addition, Sagi sold all of his holdings in Playtech (LSE: PTEC), a software-based platform for gambling websites that he founded, for £68 million ($88 million) in late November through Globe Invest, his investment company. He went on to sell 1.8% of Playtech's share capital two weeks ago, bringing his total recent proceeds from Playtech shares to £92 million ($120 million). Sagi invested in technology and innovation ventures in recent years, most of them Israeli.
Other parties interested in Israir are real estate and hotel developer Meni Weizman; Elco Holdings Ltd. (TASE: ELCO); Fortissimo, managed by Yuval Cohen; and Apax, managed by Zehavit Cohen. As far as is known, the acquisition is far from the final stages, since IDB Development was waiting for good third quarter results and a completed 2019 budget for Israir. The growing interest in Israir is attributable to the company's results, its dominant CEO, and a drop in jet fuel prices in recent weeks, which will improve Israir's results for the fourth quarter of 2018, a relatively weak month in passenger traffic. The decline in oil prices will have a positive impact on the company's results in 2019.
Israir's third quarter results, reported in November, were the best in its history, despite intensifying competition in the sector, the boom among low-cost airlines, and the rise in production inputs, a trend that has since reversed. Israir finished the third quarter with a $15 million net profit, 36% more than in the corresponding quarter last year. This quarter consisted of July, August, and September, the peak months for passenger traffic. Israir's sales turnover in the quarter totaled $144 million, 12% more than in the corresponding quarter last year. The company gained ground on internal routes to Eilat at the expense of its rival, Arkia, reporting 20% growth in this business. Israir also reported 20% growth in its gross profit to $24 million, while EBITDA was up 20% to $18 million. The company's third quarter results followed a drop in its profits in the first half of the year. Israir's net profit in the first three quarters of 2018 fell 27% to $8 million as a result of lower sale prices.
Israir's revenue in the first nine months of 2018 totaled $296 million, 10% more than in the corresponding period last year. Israir's management said that the company was engaged in additional actions and adjustments designed to guarantee its shareholders and employees a similar level of profits in the coming years.
IDB Development will begin a pricing procedure between the highest bids in late January 2019.
Published by Globes, Israel business news - en.globes.co.il - on December 25, 2018
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