The privatization of Israel Postal Company has proved a disappointment for the state. The Milgam consortium won the privatization tender with a bid of NIS 461 million. In the past, Israel Post was estimated to be worth as much as NIS 1.5 billion, and there were great hopes that the tender would bring in a substantial sum, but the end result is fairly meager.
On Thursday, it was reported that two consortia had submitted bids to buy Israel Postal Company from the state: the Milgam-Phoenix- Leiman Schlussel consortium and the Delek Israel-Rami Levy consortium. This morning, the envelopes were opened, and it emerged that both consortia had bid less than the valuation by Deloitte. The initial bids were lower than NIS 300 million, which, under the tender terms, led to a pricing round.
The pricing ended this afternoon, with the Milgam consortium having improved its bid substantially, but the amount is still far below what the Government Companies Authority had hoped for.
Minister of Communications Shlomo Karhi said, "I congratulate Milgam on the win, and I hope that the privatization will get underway as soon as possible. I believe in a competitive, free market, and I am sure that the privatization will bring new management, and new approach, and most importantly better and faster service for Israel’s citizens. All the same, the Ministry of Communications will keep its finger on the pulse at all times, and will monitor the fulfilment of the license terms of Israel Postal Company in order to ensure that the periphery of the company and the various sections of the population will not be harmed."
Milgam, which holds a 51.7% share of the winning consortium, mainly provides services to local government agencies. It is owned by the Weil family, and is active in 160 local authorities. Its partners in the consortium are units of insurance group The Phoenix Holdings (TASE: PHOE), with The Phoenix Insurance holding 21.1% of the consortium and The Phoenix Provident Funds holding 13.2%. Confectionery importer Leiman Schlussel holds the remaining 14%.
The consortium said in a statement: "We are full of belief in the State of Israel and in the power of its economy, and that it will emerge strengthened from any crisis in the future. Israel Postal Company is a foundation stone in the economic history of the State of Israel. We believe in the compny, in its management, in its impressive and dedicated human capital, and the workers who have brought about a real turnaround in the past few years and turned it into a professional and modern enterprise.
"We thank the State of Israel for its great vote of confidence in us, and commit ourselves to meeting the high expectations presented to us. Together, we are all committed to leading Israel Post to more important achievements, and to driving competition in several important areas, chiefly banking and finance through the Postal Bank, and in dispatch, courier services, and logistics. We aspire to bring about a consumer revolution that will benefit Israel’s citizens. We will all continue to strive to provide high quality service to all residents of Israel throughout the country."
In recent years, the state has injected billions of shekels into the Israel Postal Company to keep it in business. Despite this, parties that expressed interest in buying it pointed out that against its main assets - parcels post, real estate, and the Postal Bank - stood high salary costs, uncertainty about the value of the real estate, and exposure, without indemnity, to taxation of the bank.
A market source told "Globes" a month ago: "Anyone who knows how to enhance the delivery of parcels from overseas, a service that Israelis use a lot and which is an area in which Israel Post has a very large market share, might be able to turn it into a profitable business. The same applies to the Postal Bank. In any event, whoever goes into this investment will have to work for the very long term."
Published by Globes, Israel business news - en.globes.co.il - on May 19, 2024.
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