Four and a half years after collapsing and being acquired by Electra Consumer Products Ltd. (TASE:ECP), the ACE chain of retail do-it-yourself home products and appliances is up for sale. The decision to sell ACE is part of Electra Consumer CEO Zeev Kalimi's strategy of cutting back the company's retail business, exiting sectors that are not part of its core business, and bolstering its industrial activity in the air-conditioners sector, which accounts for most of the company's sales and profits.
ACE, which has 30 branches, deals in home design and maintenance. Part of its business consists of 18 branches of the Auto Depot car products chain. All of the Auto Depot branches except for two are next to ACE branches. ACE improved its profit in the first nine months of the year. Its sales grew from NIS 422 million in the first nine months of 2015 to NIS 423 million in the first nine months of this year, a 0.3% increase. Operating profit shot up from NIS 18.3 million, with a 4.3% operating profit margin, in January-September 2015 to NIS 27.8 million, with a 6.5% operating profit margin, in January-September 2016, a 52% rise.
Electra Consumer acquired ACE in early 2012, after previous owners B. Gaon Holdings Ltd. (TASE: GAON) and Shlomo Zavida accumulated a NIS 450 million debt and entered a stay of proceedings. Electra Consumer paid NIS 129 million for ACE, following a pricing process with other parties that expressed interest in acquiring the chain. Electra Consumer's management has now concluded that ACE is not suitable for the group's portfolio and the future growth planned for it. Among other things, there is little synergy between Electra Consumer's overall business, given the fact that ACE's electrical appliance sales are limited to small products.
The sale of ACE is taking place simultaneously with other measures led by Kalimi. On the one hand, he is cutting back on existing business, while on the other hand creating new growth engines, headed by the company's effort to acquire Golan Telecom Ltd. In the retail sector, Electra Consumer operates the Machsanei Hashmal, Shekem Electric and Sensor chains. Electra Consumer has closed 30 branches of these chains over the past two years, most of them in the Shekem Electric chain, considered the weakest of the three, which now has only 60 branches.
At the same time, Electra Consumer has launched an e-commerce website for the sale of the group's brands, with the aim of increasing its online business at the expense of its physical stores. The company also plans to exit its water bar business, which is under the Electra Bar brand. Electra Consumer signed an agreement to sell this business to Eden Springs, but due to opposition from the Antitrust Authority director general, the deal did not go through. The company is now trying to sell this business to another buyer.
Published by Globes [online], Israel business news - www.globes-online.com - on December 8, 2016
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