The very exclusive club of Israeli corporations whose main business is overseas will shortly be joined by Elco Holdings, controlled by Gershon Salkind. Elco Holdings has acquired the home appliance business of France’s Brandt.
The acquisition of Brandt is a major move for Elco, as it could double Elco's sales. Elco's sales totaled NIS 1.2 billion and its net profit was NIS 20.8 million in the third quarter of 2001. In the first three quarters of 2001, Elco Holding’s sales were NIS 3.5 billion, and its net profit was NIS 43.7 million. At the end of the third quarter, Elco Holdings' equity was NIS 794 million and its consolidated balance sheet was NIS 4.27 billion.
“Brandt-Moulinex entered receivership in September,” explains Elco Holdings co-managing director Michael Salkind. “Our managers in France notified us of this immediately afterwards. Some of them had worked at Brandt, and knew the company very well. Moulinex’s small household appliances operations cause the company heavy losses, but Brandt, which merged with Moulinex in late 2000, is very profitable.”
“Globes”: How is the receivership being handled?
Michael Salkind: “The receiver allowed us to do ‘cherry picking’, i.e. each bidder could choose which assets he wanted to buy and which to set aside. We originally submitted 19 bids, knowing that 15 were irrelevant. The bidding for the acquisition focused on the number of positions (the bidders would preserve). The first parameter for the bidding was continuing operations, and the second was the number of positions. The third parameter was price."
“From the outset, we built a plan that focused on the number of positions and continuing operations at a relatively low price for the asset. The inventory we bought was sold at a major discount, as were the fixed assets. We're talking about Brandt’s 13 plants' excellent equipment for a price of $700 million (before depreciation).”
When will the operations you bought show a profit?
“I'm cautious about predictions. The operations were profitable when the company went into receivership. Although ownership is changing, the managers know what to do. We believe the company will show handsome profits within the first year of operations, i.e. in 2002.”
Is this a change in magnitude for Elco’s international operations?
“This is a revolution for Elco Holdings. We were looking for a deal like this for many years, and we were lucky. 60-65% of our activities were in Israel in 2000; in 2002, that will decline to 30%. The deal will almost double Elco’s business in 2002. These were profitable operations before the company went into receivership, and the divisions bought during the receivership continue to produce a positive cash flow and profits. This is a profitable sector that should substantially improve Elco’s profitability.”
What is the synergy between Elco and Brandt?
“There are similarities and tangents between the group’s companies and the acquired businesses, especially in Electra's home appliance-related business. I'm referring to purchases of raw materials and joint customers, for example. Electra has a subsidiary in China and Hong Kong that manufactures electrical components, providing another place for cooperation between the companies. Although there is added value to synergy, it was not built into the price in our bid for the acquisition.”
Will you acquire Crystal in the future?
“Crystal wasn't included in the assets we acquired. That could change, depending on what the receiver decided to do with Crystal.”
Besides the holding in Crystal, will you buy other businesses in the receivership?
“Possibly.”
Published by Israel's Business Arena on 16 January 2002