The Central Bottling Co., which is Coca Colas concessionaire in Israel, will market Neviots mineral water.
Neviot, controlled by Moshe Podhorzer, today announced it had signed an agreement whereby its bottled mineral water would be distributed by the Central Bottling Co., Coca Colas exclusive distributor in Israel. The Central Bottling CO. currently distributes the bottled mineral water of Neviots rival, Eden Springs, but will cease doing so when the agreement goes into force at the beginning of 2001. The sale of bottled mineral water makes up about half of the sales of mineral water companies. (The remaining water is sold in containers for use in the home).
Subject to the entry into force of the distribution agreement, Podhorzer gave the Central Bottling Co. an option to buy from him half the controlling shares of Neviot for $12 million. This price reflects a company value of $28 million for Neviot - 60% higher than its market value this morning (before its share surged 30% in the course of todays trading).
The bottled water distribution agreement between Neviot and Coca Cola (which replaces Neviots agreement with Tempo) is expected to have far-reaching implications on the mineral water market in Israel. Eden Springs sales are currently three times higher than Neviots, and its profit far exceeds that of its rival. It is estimated that the distribution system is crucially important in obtaining such an advantage.
Sources in the soft drinks sector estimate that Eden Springs, the leading company in the Israeli mineral water market, is the main loser from Neviots new distribution agreement. Not only will the company lose the most effective distributor in the market in 18 months, but the prospects of the deal whereby 25% of the companys shares were to be sold to a US investment fund appear dim. Eden Springs, which is controlled by Roni Naftali, announced the deal last week.
Eden Springs, whose shares fell 7% today, said that it was considering operating an independent marketing system, following the expiry of its present distribution agreement. The company added that it did not expect recent developments to hurt its business results or the prospects of its deal with the US fund.
Published by Israel's Business Arena December 21, 1999