Six months after failing to acquire Coop, supermarket chains are casting eyes at branches that the Yenot Bitan group wants to sell.
Meetings or negotiations on the sale of these branches were recently held with the Rami Levy, Yochananof, Shufersal subsidiary Be, and brothers Ilan and Sasi Sheva's Shuk City chain. Meanwhile, Victory Supermarket Chain notified the Tel Aviv Stock Exchange two weeks ago that it was negotiating to acquire branches from Yenot Bitan.
The negotiations were with Nahum Bitan, the man who three years ago became the owner of Israel's second largest retail chain overnight, or with intermediaries. Nahum Bitan will have to decide soon on the future of his group.
One possibility is the sale of 10-20 of his 180 branches to a competing player. Nahum Bitan will probably prefer to sell to a player who is not a direct and powerful competitor like Rami Levy or Victory Supermarket; he is likely to prefer that his branches be acquired by a pharmacy chain such as Be, or by a smaller player who constitutes a minor threat for him.
In any case, given the multiple negotiations that the group is conducting, it is clear that it is seeking to maximize its profits from such a sale in order to obtain proceeds as close as possible to the NIS 150 million it still owes to the trustees from whom it acquired the Mega chain. The group also has other debts, and Mega, which is under trusteeship, does not have a line of credit. The group says that Yenot Bitan has already repaid NIS 330 million in debt, 70% of the total.
Sources in the market said that they had received offers from various intermediaries in recent weeks that included the purchase of up to 20 Yenit Bitan branches - double the initially estimated number of branches. It appears that the NIS 150 million in proceeds from the sale of the branches are only a small part of the investments and injections that the group needs.
This is the second time in less than a year that the retail market is considering an acquisition of a substantial number of branches. Just six months ago, Machsanei HaShuk acquired the Coop chain after the latter collapsed. The same players that considered acquiring Coop's branches at that time (except for Machsanei HaShuk, which is busy absorbing Coop) are now seeking to expand their deployment by acquiring branches from Yenot Bitan.
There are some, however, who believe that the sale of branches for NIS 150 million will reduce the chain's annual sales turnover. Such a sale will help service its debt in the short term, but will cause damage in the medium and long term. It therefore appears that recruitment of an external investor sooner or later will be unavoidable, despite Nahum Bitan's strong opposition to acquiring an active partner that will interfere in management.
"Globes" reported last month that the Yenot Bitan group was delaying payments to suppliers and experiencing a sharp decline in sales, and that its controlling shareholders had injected tens of millions of shekels into the chain in 2019. These assertions are supported by a report by economic consultancy firm Dun and Bradstreet stating that there have been signs of a worsening in the company's payment ethics. Given this and other indications, the consultancy company substantially downgraded its rating for the chain's risk. The sales turnover of the two chains, Mega and Yenot Bitan, totaled NIS 4.7 billion in 2018.
A year ago, "Globes" reported that Nahum Bitan was taking steps to raise NIS 300 million from investment institutions and other concerns. The aim was to repay the balance of the debt taken by the Yenot Bitan group when it acquired Mega. Bitan negotiated with US investment fund Blackstone for financing in the form of an investment or a loan. As far as is known, these negotiations resulted in no deal or loan.
Yenot Bitan, Yochananof, Be, Rami Levy, and Shuk City did not respond to a query from "Globes."
Published by Globes, Israel business news - en.globes.co.il - on September 16, 2019
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