Mer Group (C. Mer Industries Ltd.) (TASE: MER), controlled by FIMI Opportunity Funds, is selling its 50% stake in Merimon Gas to the Noy Fund for NIS 32.75 million.
Mer Group will also receive NIS 3.6 million for every 10 million cubic meters of gas consumed by customers, adjusted by annual calculation, beyond 150 million cubic meters of gas in 2020-2014. The final calculation of the proceeds will take place after that period; the final amount could reach NIS 60 million.
Completion of the deal, which is subject to various contingent conditions, is scheduled by the end of November, after which Mer Group will post a NIS 20 million pre-tax capital gain.
Merimon is a special purpose vehicle founded in order to plan, construct, and operate a distribution system for natural gas in Israel's northern region under a 25-year license granted to it. The distribution area includes Haifa, Haifa Bay, the Krayot region north of Haifa, Nahariya, Maalot Tarshiha, Akko, Karmiel, Kiryat Shmona, Tiberias, Rosh Pina, Tzfat, Katzrin, and Tzemach.
Merimon, half of whose shares are owned by Rimon, has invested NIS 150 million to date in building gas distribution infrastructure, and plans to invest NIS 200 million more in deploying it, mainly in order to connect more areas to the gas distribution network.
Mer Group share rises in response to the report
The Mer Group share price responded to the report with a 6% jump, but the share price has nonetheless plummeted over 50% over the past year, following poor results, making it one of FIMI's least successful investments. Since FIMI acquire a controlling interest in Mer Group in September 2013, the company's share price has lost 80% of its value, pushing its market cap all the way down to NIS 98 million.
Mer Group implements projects and provides services in communications, security, and guarding. The company finished the first quarter of 2019 with a NIS 17 million net loss, compared with a NIS 5 million net loss in the first quarter of 2018.
Together with Mer Group's mounting losses, the company's auditors mentioned that the company had not meeting some of the financial criteria required by its creditor banks since the end of September 2018. After some of these failures were redressed, Mer Group received another waiver of the requirements from the banks in May 2019.
As of the end of the first quarter, Mer Group had bank loans totaling NIS 257 million, NIS 204 million of which were short-term loans.
The auditors added that Mer Group's projected cash flow for 2019 took into account "collection from customers, sale of assets, and securitization of customers' debts," and that the company's management, headed by CEO Nir Lempert, and its board of directors believed that the Mer Group's plans would be carried out, and that it would "meet its obligations in the foreseeable future."
Noy Fund, which operates and invests in infrastructure, is managed by chairman Pinchas Cohen and managing partners Ran Shelach and Gil-Ad Boshwitz. The fund has raised NIS 6 billion to date in three funds from large investment institutions, including Phoenix Insurance, Menora Mivtachim Holdings, Altshuler Shaham, Meitav Dash, Amitim, Halman Aldubi Investment House, Migdal Insurance, Bank Hapoalim, Bank Leumi Provident Funds, and other institutions.
Published by Globes, Israel business news - en.globes.co.il - on August 26, 2019
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