After several failed attempts to sell textile company Kitan, Clal Industries Ltd., controlled by Len Blavatnik, is looking to sell its holding in the company through a party of interest deal: fashion chain Golf & Co. (TASE:GOLF), also owned by Clal, announced today that it is in talks with the controlling shareholder to buy Kitan.
Golf said, “To examine whether the deal is worthwhile and conduct talks, the company is being supported by an independent committee that has been established by the board of directors,” and, at this stage, there is still no certainty a deal will be signed. In the past, Kitan products were sold in Golf stores, however, the partnership between the companies ended a few years ago due to differences of opinion.
Kitan has produced home textiles since 1958, but, in recent years, like many other Israeli textile companies, it has had difficulty coping with rising production costs and competition with cheaper markets. In 2012, two months after control of Clal was transferred from IDB Holding Corp. Ltd. (TASE:IDBH) to Blavatnik, Kitan announced that it was ending production in Israel and closing its factory in Dimona, following a prolonged period of contraction in its activity and workforce. Since the transfer of the company to Blavatnik, there have been attempts to sell it.
Due to its condition, Kitan today is an insignificant element of Clal’s portfolio, and was valued at only NIS 15 million on Clal’s books at the end of 2013. According to the year-end report, Kitan was responsible for a NIS 2 million loss for Clal - significantly less than the cumulative loss of NIS 32 million over previous two years (2011-12). Clal’s 2013 reports show that at the beginning of last year, the company put up NIS 19 million in bank guarantees for Kitan’s debts to the banks. Blavatnik delisted Clal last year with an investment of NIS 1.2 billion, at a company value of NIS 2.5 billion.
A good year for Golf
Kitan CEO Esther Eldan said, “Kitan has reached the stage in which its strategic direction must be to take it to the next level, and to expand into a larger chain, or, alternately, an acquisition or a partnership with a strategic partner who operates in housewares.” Eldan added, “Due to production costs in Israel, which have become increasingly expensive and have led to contraction and the eventual cessation of production in Israel - like most companies in Israel - the company has in recent years established a retail chain for the sale of home-textile products in Israel, branded Kitan, and today the retail chain has 25 stores.”
The buyer, Golf, currently trades at a market cap of NIS 500 million, following a 36% rise in share prices over the past year. Clal holds 62% of the company. Golf is a fashion chain, and sells a number of brands other than its own, including Max Moretti, Polgat, Intima, and Sprint. The company, under the management of Eli Mizroch, has home fashion operations as well. Among the brands sold are Golf & Co., Golf Baby, Golf Kids and Tulip. Aharon Meidan is Golf chairman.
In 2013 Golf benefited from a favorable shekel-dollar exchange rate and reduced expenses, which increased its profitability. According to the company’s 2013 end-of-year report, net profit was up 4.5% to NIS 50 million. However, there was no significant change in total revenue, at NIS 691 million.
Published by Globes [online], Israel business news - www.globes-online.com - on April 29, 2014
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