Aaron Frenkel reveals plans to buy control of Shufersal

Aaron Frenkel credit: Morag Bitan
Aaron Frenkel credit: Morag Bitan

Talking to "Globes," the Israeli billionaire speaks for the first time about his plans to buy a 20% stake in Israel's largest retail food chain.

"Shufersal is the number one company in the country in the field of retail marketing and other products and I love to go with number one in every field. It is a company that has the potential to grow, expand and streamline," says Israeli billionaire Aaron Frenkel, speaking for the first time about the negotiations he plans to conduct with the shareholders for a 20% stake in the biggest retail chain in Israel.

Six institutional investors currently hold 60% of the shares in Shufersal Ltd. (TASE:SAE), which is traded with a market cap of NIS 6.4 billion and Frenkel says that he wants to acquire a third of their holdings. Some of the institutional investors have reportedly expressed interest in selling shares, although at least one of the big shareholders claims that his first offer was too low and that they would not sell at that price.

Frenkel, who lives in Monaco, came at the end of last week to Israel so that he could vote in the Knesset elections, and also to meet with the institutional investors holding stakes in Shufersal. He stresses that matters are currently in the initial stages and that "nothing has been agreed." He adds in recent years he has been approached several times about a possible investment in Shufersal, "from all sorts of directions including the existing shareholders. I received several calls on the matter."

Shufersal is managed without a controlling core and over the past year there has been a power struggle between the company's top executives, which led to the resignation of the former CEO Itzik Abercohen, who subsequently returned as chairman and is considered the most powerful man in the company who has the final say. Since the start of 2022, Shufersal's share price has fallen 5%, along with a sharp fall in profitability. Together with the intensifying competition in the Israeli retail food market, the chain has been forced to implement an aggressive streamlining plan.

Frenkel does not hide his plans to become the company's main shareholder. "The management needs the backing of an owner who understands the needs of the company," he says, "Somebody that can push it forward to bigger things."

He also makes clear that he has no plans to be involved in the management of the chain and is not bothered by the possibility of a consumer protest developing against Israeli marketing chains due to the rising cost of living.

"The complaints against the chains over the cost of living should be more balanced. There are manufacturers, importers and marketers here. I believe that the best way to maintain appropriate price levels is to simply open everything up to competition. Competition is the one that can bring about equitable and decent price levels for everyone. Let them open up imports and let everyone do what they want, so much the better."

What are your impressions of the chain's chairman Itzik Abercohen?

"Abercohen seems to be a practical man who knows the work, and it seems to me that he runs the business in a strong way."

There are rumors that he is the reason that makes you interested in investing in Shufersal?

"I don't even know how to spell his name."

Frenkel's interest in Shufersal, which is undergoing a streamlining process in order to provide more significant value, has raised eyebrows after he previously made huge profits from two quick deals on the Tel Aviv Stock Exchange (TASE).

Several months ago, Frenkel sold all his holdings (37.22%) in income producing real estate company Bayside Land Corp. Ltd. (Gav Yam) (TASE:BYSD1) to Property and Building Corp. Ltd. (TASE:PTBL) for about NIS 3 billion cash. This is after taking advantage two years previously of a tens of percent drop in Bayside's stock price due to concerns about the consequences of the Covid crisis on its business (mainly office buildings). He began to purchase shares in the company in a way that later made him a candidate for acquiring control of it. This deal brought Frenkel an incredible profit of about NIS 1.25 billion and a return of about 100% on the capital he invested in Bayside. The person who brought about the Bayside deal is Ilan Geifman, former Aspen CEO, who handles all Frenkel's real estate business and his contacts with Shufersal.

Previously, Frenkel had made a profit in August 2019 on the sale of his stake in Yavne-based UAV manufacturer Aeronautics, which was sold to Rafael Advanced Defense Systems and Avichai Stolero. In December 2018, Frenkel had begun buying Aeronautics shares, with the company in crisis due to its deteriorating financial results and a defense sales affair that it had been caught up in. Frenkel built a 32% stake at an investment of NIS 170 million and the sale to Rafael and Stolero reportedly brought him an NIS 85 million profit.

Frenkel claims that in both cases - Bayside and Aeronautics - he planned to become controlling shareholder, but the other shareholders made offers that were hard to refuse, so he agreed to sell. In any case, regarding Shufersal, he claims that he intends to develop the chain's main growth engines: "There are a few more ideas beyond standard retail," he says. "For example, in the field of financing. It also has interesting real estate and the possibility of developing into institutional marketing - for hotels and restaurants."

Published by Globes, Israel business news - en.globes.co.il - on November 3, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

Aaron Frenkel credit: Morag Bitan
Aaron Frenkel credit: Morag Bitan
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