The agreement being hammered out for the sale of shares in Shufersal Ltd. by five institutional bodies (TASE:SAE) to Aaron Frenkel is likely to include two special clauses, a source close to the deal has told "Globes." The first clause says that if Frenkel sells the shares he buys to a large organization, he will share some of the profits with them that he makes. The second clause states that if he buys more shares in Shufersal at a higher price, probably from Migdal (TASE: MGDL), which is not part of the deal being negotiated, then the institutional bodies will be compensated for the higher price that Frenkel is paying for the shares.
Six Israeli institutional bodies own 60% of the country largest supermarket chain. Five of them (Altshuler Shaham, Harel, Phoenix, Menora-Mivtachim and Clal Insurance) are in talks with Frenkel to each sell 20% of their holdings. Migdal is not part of the talks because it claims the price being paid of NIS 25 per share is too low.
Shufersal's share price has risen more than 10% over the past two weeks and is currently trading at NIS 24 per share, just below the price that Frenkel has offered to pay. If the sale goes through then Frenkel will have a 10% stake in the first stage with an option to increase it to 15% and even more.
An attempt to deter Frenkel from selling his stake quickly
The aim of the institutional investors is for Frenkel to enter Shufersal and become a dominant shareholder. The introduction of the clauses that will require him to share the profits if he decides to quickly realize his holdings and reap a quick profit, is actually intended to try to discourage and keep him in Shufersal for a long period of time. The institutions are actually interested in selling some of their shares to Frenkel, with the goal that he will stay for a long time and support the improvement plans, especially the real estate that Shufersel wants to promote.
The institutions are concerned about the poor performance of the stock, which has fallen 7% in the past year, and is suffering from weakness due to the increased competition in the retail sector and a jump in the costs of employee wages and food prices.
A source at the institutional investors told "Globes" that the institutions want to support Itzik Abercohen, the chairman who was elected a little over two months ago, after a series of upheavals in the company's management this year. "We want to uplift Abercohen. We have seen that almost all companies without a core of control in the stock market simply do not perform too well. I think this is a move designed to strike a certain balance."
The source added, "It is true that the institutions supported Abercohen, but it was more because he was the lesser evil. We said, there is someone here who knows the company, it is better to take him. But we see that, despite this, things are not working there as they should be, and it seems to us that if there is a 'hands on' controlling shareholder, this would balance matters, and would be good for the company."
Published by Globes, Israel business news - en.globes.co.il - on November 8, 2022.
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