NIS 1.8 billion is the astonishing sum that brothers Yossi and Shlomi Amir (Amar) will derive from their stock market adventure with food retailing chain Freshmarket (TASE: FRSM). Each of the brothers will receive half this amount, in one of the most impressive killings made on the local stock market, all within just two years.
The proceeds with which the Amir brothers will part from Freshmarket are mainly from the sale of their shares to Paz Oil Company Ltd. (TASE:PZOL), which, assuming that the deal goes ahead as planned, will produce NIS 1.1 billion cash and approximately NIS 280 million in Paz shares.
Besides this, since Freshmarket was floated on the stock market just over two years, the brothers have benefitted from dividends from the company of some NIS 250 million and have sold shares to financial institutions to the tune of NIS 170 million. They also received several million shekels in annual management fees.
The Amir brothers (sons of David Amar, who was head of the Nesher local council) began their retailing activity in 1995, through a private company that held two supermarkets, one in Kiryat Bialik and one in Haifa.
Freshmarket's expansion came in two stages. The first was in 2008-2016, when it bought sixteen branches, and the second in 2017, when it bought thirteen branches of the Mahsanei Lahav chain for NIS 85 million from Dan Bus Company, which had bought the chain from Eli Lahav in 2010.
The brothers' encounter with the Tel Aviv Stock Exchange actually started badly. In July 2018, the planned flotation of Freshmarket failed, because of differences over pricing, not very large, between them and financial institutions that were not prepared to participate in an IPO at a valuation of at least NIS 750 million, which is what the brothers sought (and which represents about one third of the valuation at which the chain is now being sold).
Less than a year later, in May 2019, Freshmarket completed its flotation at a NIS 750 million valuation, but instead of an offer for sale as planned by the Amir brothers in the first attempt, the flotation took place in the form of an issue of new shares to the financial institutions, and the proceeds went to Freshmarket itself.
Immediately after the flotation, the company distributed a NIS 220 million dividend, of which NIS 165 million went to the brothers. Altogether, from 2019 onwards, Freshmarket distributed over NIS 350 million in dividends, of which nearly NIS 250 million went into the pockets of the Amir brothers, in accordance with their stakes in the company.
As in the case of its competitors in Israel food retailing sector, the coronavirus pandemic had a positive effect on Freshmarket's results, as consumption grew. The chain's expansion also boosted its financial results. It now has forty branches, which has helped to strengthen it versus its suppliers, leading to better terms of trade and product prices. The fact that the branches are in residential neighborhoods and city centers also helped.
These branches, Freshmarket says, "answer the consumer's need for convenience, availability, freshness, service, and personal attention", something also reflected in the chain's prices and profits.
Investors took note of the chain's growth, and Freshmarket doubled its market cap. Following the rise in its share price since the deal with Paz was reported, its market cap is close to NS 2 billion. During the period since the company was listed, the Amir brothers have exploited the rise in its share price to realize part of their holdings, for a total of NIS 170 million, in two sales that took place last year.
In addition to the share sales and the dividends, as managers of the chain that they founded 26 years ago, the brothers picked up some small change in the form of annual management fees that in the period 2017 to 2020 amounted to NIS 25 million, half of which went to Yossi as chairman, and half to Shlomi as CEO.
Published by Globes, Israel business news - en.globes.co.il - on August 8, 2021
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