Maabarot Products Ltd. (TASE: MABR) today notified the Tel Aviv Stock Exchange (TASE) that it had decided to exercise its option to sell its entire 49% stake in the Materna partnership to Osem Investments Ltd. (controlled by Nestle SA (SWX:NESN)). Maabarot expects that its proceeds from the sale of its shares in the Materna baby food partnership will total NIS 550-600 million, in accordance with the adjustments required for calculating the proceeds stipulated in the parties' option.
According to Maabarot's announcement, the actual exercise of the option is likely to take place by the second week in June 2017.
Maabarot expects to post a NIS 400-450 million after-tax capital gain on the sales, thereby increasing its shareholders' equity from NIS 387 million to NIS 787-837 million.
The partnership in Materna accounts for most of Maabarot's revenue. Osem owns the other 51%, which it acquired seven years ago for NIS 269 million. Materna is Israel's leading producer of breast milk substitutes, with a strong position in the sector and inelastic demand for its products, resulting in high growth rates and profits. On the other hand, Maabarot's efforts to expand to new areas of business, including overseas, have so far not yielded the desired results. Steep learning curves and marketing efforts have been costly, with revenue not growing as expected.
With the publication of Maabarot's TASE notice, chairman Eyal Shalmon said, "Three decades after Kibbutz Maabarot founded Materna, and following a successful seven-year partnership with Osem-Nestle, it is time to implement the second stage of the agreement between the parties by transferring full ownership of Materna to Osem-Nestle. We are proud that Materna has been a leading brand for years - most babies in Israel have been fed its products. Materna has stood for innovation, quality, and reliability, and we are convinced that Osem-Nestle will be able to lead Materna to new heights and continue the company's growth trend."
Published by Globes [online], Israel Business News - www.globes-online.com - on February 13, 2017
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