It took a little more than a year, but Apax Israel CEO Zehavit Cohen has finally finished raising money for her company's new investment fund - Apax MiddleMarket (AMI) Israel. Besides the relatively long time taken to raise the money (in most cases, raising capital for a private equity fund takes a few months), the fund raised $250 million, while Cohen initially planned to raise $300 million.
Most of the investors in the fund, which will focus on medium-sized Israeli companies, are foreign institutions from the US, Australia, and Singapore, as well as local investors, such as Bank Leumi (TASE: LUMI) and Bank Hapoalim (TASE: POLI); investment houses like Meitav DS Holdings Ltd. (TASE:MTDS) and Altshuler Shaham Ltd.; and veteran pension fund Amitim.
A significant part of the amount raised (at least 25%), however, will come from the global Apax Partners fund and its partners. The partners will invest $40 million of their own money (including Cohen, who was recently appointed a partner), and Apax itself will invest tens of millions of dollars more. Apax is portraying this investment as a commitment by the partners, but it is actually likely to indicate difficulties. The reason is that the partners do no usually invest their own money in private equity funds.
10 acquisitions?
Last March, Reuters reported that Nico Hansen, investment committee chairman and partners in the global Apax fund, said that the new fund would acquire 10 Israeli technology, telecommunications, consumer, and health companies for an aggregate total of $25-100 million, and that the fund expected to raise $500 million from local investors.
In addition to the investment by its partners, AMI is also unique in another way: this is the first time that Apax is establishing a fund for investments in a specific country. The global Apax fund has made several acquisitions in Israel in recent years, but these were mainly large and leading companies. Worthy of note are Apax's holdings in communications giant Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), sold at a large profit; food concern Tnuva Food Industries Ltd., which stands to be sold to Bright Food; and Psagot Investment House Ltd., Israel's largest investment house (76%). Sources close to Apax say that these acquisitions gave the fund's investors a return of over 30%.
Apax's investments in Israel consist mostly of companies that dominate their field of business. In recent months, despite still being in the midst of raising capital, AMI was rumored to be interested in several companies, including New Pharm, Israel's second largest drugstore chain; paint company Tambour; the Yad2 website; and Internet group Zap. None of these became acquisitions. It is reasonable to assume that now that the financing round for the new fund has been completed, its portfolio will start filling up.
Published by Globes [online], Israel business news - www.globes-online.com - on November 27, 2014
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