Israeli income producing property company Melisron Ltd. (TASE: MLSR) reported today that it had signed an agreement to buy Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) 26.6% stake in the Ramat Aviv Mall in north Tel Aviv for NIS 425 million, plus VAT. The price will be paid to Migdal by December 30, and Melisron will also pay the purchase tax on the deal. Completion of the deal will give Melisron 100% of the shares in the Ramat Aviv Mall.
Melisron owns several of Israel's largest malls including the Ramat Aviv Mall. Melisron already owns 73.4% of the mall, which is listed in its books at a value of NIS 2.5 billion for the entire property, including debt. Ramat Aviv Mall's annual adjusted current net operating income (NOI) is NIS 147 million.
Melisron reported in early November that its board of directors had approved making a bid to acquire Migdal's stake in the mall, and had authorized Melisron's management, headed by CEO Ophir Sarid, to negotiate with Migdal and sign documents for acquiring Migdal's stake in the mall. The company through which Melisron and Migdal hold the mall has a debt of over NIS 600 million.
Ramat Aviv Mall, which was founded by the Africa Israel group and opened in 1997, has 32,000 square meters of rental space. Due to its location and mix of stores, it is regarded as one of Israel's leading shopping malls. In addition to the mall's two commercial floors, the property has 11 office floors.
Raising money to fund the acquisition
Melisron reported yesterday that it was beginning a NIS 500 million financing round, consisting of a share offering to the public. The financing round is designed to strengthen the company's equity, increase its liquidity, and help it buy the minority shares in Ramat Aviv Mall.
In yesterday's announcement, Melisron stated, "In accordance with the approval in principle by the company board of directors, and as part of its strategy of reinforcing its capital structure and expanding its business, the company is considering raising capital through an offering of shares in the company to the public. If and when it is held, the share offering will be through a shelf offer report corresponding to the company's shelf prospectus."
Melisron added that its controlling shareholder, Ofer Investments, controlled by Liora Ofer, had announced its intention of buying Melisron's shares in the offering, including participation in the preliminary tender for designated investment institutions. Ofer Investments currently holds 58.15% of the shares in Melisron with a value of NIS 5.7 billion.
Sarid commented, "We are glad to announce a financing round as we notified the Tel Aviv Stock Exchange. We are very glad that the controlling shareholder, Liora Ofer, announced her intention of taking part in the offering, which expresses her great confidence in the company. This measure will help strengthen the company's capital structure and continue its business development in the future."
Melisron, one of Israel's two largest shopping mall companies, has a current market cap of NIS 9.8 billion, following a 43% return on its share since the beginning of 2019.
As of the end of September, Melisron's equity was NIS 6.5 billion, and its net debt was NIS 9 billion. The company finished the first nine months of 2019 with NIS 1.177 billion in revenue, similar to the corresponding period last year.
Gross profit from renting properties (consolidated and expanded) was up 0.5% to NIS 866 million in the first nine months. The company also posted a NIS 395 million profit from an increase in the fair value of investment real estate that it owned. At the same time, net financing expenses plummeted 31% as a result of a decrease in real interest expenses, lower linkage differences, and lower one-time expenses for debt replacement.
Melisron's net profit in the first nine months of 2019 was NIS 652 million, 57% more than in the corresponding period last year. Cash flow from current activity in this period totaled NIS 564 million, about the same as last year.
Published by Globes, Israel business news - en.globes.co.il - on December 25, 2019
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