Phoenix consortium signs MOU on Yeinot Bitan takeover

Nahum Bitan / Photo: Shlomi Yosef

With Klirmak Capital, Arkin Group and Barak Capital, The Phoenix Holdings plans to buy 45% of Nahum Bitan's supermarkets group.

Nahum Bitan is on the way to losing control of the retail empire that he built. A consortium of investors headed by insurance and financial group The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) has signed a memorandum of understanding with retailing group Yeinot Bitan-Mega for the purchase of 45% of its shares for NIS 400 million.

If a deal is completed, Phoenix will inject NIS 200 million in exchange for 20% of the shares, with the remainder of the stake purchased being divided between private equity firm Klirmark Capital, Arkin Group, and Barak Capital. The consortium is led by Zvika Manes, CEO of Barak Capital Underwriting.

For the time being, it is still a matter of a non-binding MOU, giving the consortium exclusivity to examine the deal and carry out due diligence. The putative deal values the retail group at NIS 890 million.

Yeinot Bitan has also had talks with the Kedma Fund, which, together with other investors, sought to buy 50% of the group for NIS 400 million, valuing it at NIS 800 million. It is believed that there are also other interested parties. Both the Phoenix consortium and Kedma made it a condition of investing in Yeinot Bitan-Mega that Nahum Bitan, who founded Yeinot Bitan and got into financial difficulties after acquiring the troubled Mega group - should not be involved in managing the business, and that the managers he hired - Michael Luboszic as CEO, and Shlomo Rodav as chairman - should remain in their posts.

The coronavirus pandemic, which has boosted sales for supermarkets in Israel, allowed Yeinot Bitan, which got into cash flow difficulties eighteen months ago, some room for maneuver, with a huge increase in sales. It seems however that the banks - Haoalim and Mizrahi Tefahot - are determined to close a deal.

Yeinot Bitan recently stated that it intended to go public in the future, and even promised shares to its employees, which made it easier for them to cut its workforce aggressively, and close its logistics center.

About a year and a half ago, "Globes" revealed that Yeinot Bitan had run into cash flow difficulties, and was delaying payments to suppliers. Since then, the chain has sold a large number of branches to its competitors, and received NIS 150 million in credit from Bank Hapoalim and Bank Mizrahi Tefahot Bank, after passing on a large loan from Klirmark Capital.

At the same time, Nahum Bitan for the first time hired senior executives to manage his company: Michael Luboszic was appointed CEO, and Shlomo Rodav was appointed chairman of its board. Having sold of its several outlets, the group's reach is considerably smaller, and it has downsized from about 180 branches to about 150 branches. However, in terms of number of branches, it is still the second largest retail group in Israel.

Phoenix is the second largest insurance and finance group in the domestic market in terms of market capitalization, with a company value of more than NIS 4.8 billion. As of the end of the second quarter of this year, the Phoenix Group managed assets totaling NIS 208 billion.

The Arkin Group, owned by Mori Arkin and managed by his son Nir, is one of Israel's most prominent investment groups, certainly among the privately held ones. The company manages an independent investment network that takes part in significant deals in Israel, sometimes alongside large institutional entities.

While still in talks over a partnership with the Kedma Fund, "Globes" has learned that the Yeinot Bitan-Mega Group is also setting up a new format, for discount retail outlets. The new format will be called "Mega Market", which the group defines as a new retail chain. As far as is known, the first branch to be converted to the new format will be the Yeinot Bitan supermarket in the Raanana industrial area. This location was supposed to have been part of a sale transaction with competitor Yohananof, but the sale was called off. The branch was closed about three months ago, and is now expected to open under the new format.

Published by Globes, Israel business news - en.globes.co.il - on November 17, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Nahum Bitan / Photo: Shlomi Yosef
Nahum Bitan / Photo: Shlomi Yosef
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