Israeli income-producing real estate company Amot Investments Ltd. (TASE:AMOT) a unit of Alony Hetz Property and Investments Ltd. (TASE: ALHE), announced today that it has rewached an agreement with Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) to buy all the rights in its logistics center in Shoham near Ben Gurion airport for NIS 445 million.
The 50,000-square meter logistics center is located on a 77-dunam (19.25-acre) site. Some of the facility consists of an up-to-date logistics center for automated storage up to a height of 42 meters. The property also has 41,000 square meters of unused construction rights.
Amot said that the logistics center was one of the world's largest storage and shipping centers for drugs, active ingredients for the drug industry, and medical equipment. The technology used in the center is one of the most advanced in the world, based on automated computerized storage, assembly and distribution systems.
At the same time, Amot signed a lease with Teva subsidiary Salomon, Levin, and Elstein (SLE), under which SLE will rent the logistics center for 10 years at NIS 22 million a year plus VAT and index linkage.
SLE has a number of options for extending the lease to a total of 24 years and 11 months. The rent will be determined at the exercise date for each option period according to the market prices at the time. During the entire lease period, SLE will manage and maintain the logistics center on its own responsibility and at its own expense. Teva guaranteed SLE's commitment under the lease agreement.
The agreement is subject to approval from the Israel Competition Authority director general.
"We are glad to announce this strategic deal, which constitutes a milestone in our logistics activity," Amot CEO Avi Mosler said. "The logistics center that we are buying is one of the leading and most advanced in the world. It has approval from a broad range of leading international pharma agencies.
"This deal comes on top of a number of acquisitions we have made in the past two years in the logistics centers sector with an aggregate value of NIS 900 million. As part of this we bought three logistics buildings and began developing and constructing a 50,000-square meter logistics center for Shufersal Online in the Modi'in industrial zone. We will continue our constant search and examination of business opportunities in the sector, and hope to go on making successful deals that will enable us to carry out our growth strategy in this instrument, in which demand is strong."
The sale has been on the agenda for two years
The sale of Teva's logistics center was already on the agenda two years ago, when Teva CEO Kare Schultz presented his extensive streamlining plan. Teva planned at the time to find a buyer for the activity of the SLE distribution company, which owns the logistics center, because while SLE's activity is profitable, it is not part of Teva's core business. A few months later, however, the company announced a change in plan, stating, "After thorough consideration of SLE's activity and business in Israel, taking into account a range of business considerations, Teva has decided to retain SLE's activity instead of going ahead with the sale." It was stated at the time that Teva would retain SLE with all of its properties, including the logistics center. 18 months later, Teva again changed its mind, and although it is retaining SLE's business activity, the logistics center - the property itself - is now being sold to Amot.
The sale of the property will help Teva improve its cash flow somewhat, which was poor in its latest financial statements and is critical for the company's ability to repay its debts on time. Teva's debt totaled $28.7 billion at the end of the second quarter (this was reduced early in the third quarter when Teva repaid $1.7 billion in bonds), following a cash flow of negative $227 million in the second quarter.
No change is expected in the working conditions for SLE's employees; they will continue working as usual at the logistics center, which Teva will rent from Amot. The sale to Amot followed a short focused auction, won by Amot.
Published by Globes, Israel business news - en.globes.co.il - on October 10, 2019
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