Burger King Israel, owned by Meshulam Riklis, and Bank Hapoalim (LSE:BKHD; TASE:POLI ) are expected to petition the court for a stay in proceeds tomorrow. The Shomron - Molcho law firm represents Burger King Israel. Burger King Israel's its debt is estimated at $12 million, including $10 million to Bank Hapoalim.
A “Globes” website exclusive yesterday reported that Burger King Israel CEO Meir Omer had been fired. For years, Burger King has been looking to sell the Israeli chain and merge with another chain. These efforts included advanced negotiations with Israeli hamburger chain Burger Ranch, which broke down. Other negotiations were held with Domino’s Pizza, Sbarro, Pizza Hut and Super Sol (NYSE: SAE; TASE:SAE).
In the past two years, Riklis has demanded $25 million from Paz Petroleum owner Zadik Bino for Burger King Israel in order to merge it with Burger Ranch. He later lowered the price to $12 million, plus coverage of a $9 million owners loan.
Burger King Israel has 56 branches, and has been hurt by its smaller deployment compared with Burger Ranch and McDonald’s Israel, which each operate about 100 branches. The chain was also hurt by frequent changes in management, including four CEOs. Four partners currently own Burger King Israel, including Riklis’s 45% stake.
Under Riklis’s contract with Burger King, the international chain can cancel Riklis’s franchise if he damages Burger King’s global brand image. The contradiction is that the joint petition with Bank Hapoalim could save the chain. Since Burger King Israel was founded with loans, most of its cash flow goes to its creditors. Legally, and business-wise, it would be easier to sell the company and conduct negotiation under the court’s protection. All its debts would be suspended and it could operate undisturbed.
Published by Globes [online] - www.globes.co.il - on February 5, 2003