The 10th anniversary of retail chain Rami Levy Chain Stores Hashikma Marketing 2006 Ltd.'s (TASE:RMLI) IPO is in the coming days. These 10 years have been a huge success, both for the chain's investors, who have enjoyed high returns, and for controlling shareholder and CEO Rami Levy; the value of his holdings, together with the dividends and salary he has received, have made him one of Israel's wealthiest and most liquid businessmen.
Since the discount chain's offering, its business has surged dramatically, and it has become one of Israel's leading national supermarket chains, with almost 50 branches, compared with fewer than 10 branches in 2007, when most of its sales were in the Jerusalem area. The chain reported substantial growth in its main business sectors during this period.
The chain's IPO was held at a valuation of NIS 500 million, after money (it raised NIS 170 million with an offering of stocks and bonds). The shares have since given investors a return of 600%, and the chain's current market cap is NIS 2.4 billion, second only to the much larger Shufersal Ltd. (TASE:SAE) among Israel's supermarket chains.
Rami Levy's regular business has grown dramatically, with annual revenue rising seven-fold to NIS 4.5 billion in 2016 and net profit more than tripling to over NIS 90 million, compared with less than NIS 30 million in the year of the company's IPO.
Sold shares for hundreds of millions
The Rami Levy IPO was also greatly beneficial to the economic standing of its controlling shareholder, a self-made businessman. A crude calculation shows that the chain has generated NIS 2 billion in value for him since the IPO.
Levy began his career in the 1970s with a small store in the Mahane Yehuda market in Jerusalem. He worked in marketing products to stores and chains in the 1980s before opening the first branch of a discount supermarket in Israel's capital in 1992.
Most of the value for Levy has come from the boom in the chain's value since its IPO. The currently value of his holdings (just under 50%) in the chain is nearly NIS 1.1 billion, after he sold parts of his holdings on several occasions since the IPO, receiving over NIS 400 million in the process.
In addition, since the IPO, Rami Levy Chain Stores has distributed NIS 670 million in dividends to its shareholders, and Levy's share of these dividends amounts to NIS 400 million to date. The chain has also paid Levy the "trivial" sum of NIS 37 million over the decade for his services as CEO.
As if that were not enough, Levy has extensive activity in real estate, with a considerable portfolio of assets, mainly in the Jerusalem area. He also owns some of the properties in which the chain's branches operate. This holding generates additional revenue in the tens of millions of shekels.
"The IPO helped the chain grow"
Levy told "Globes", "What pushed me towards the Tel Aviv Stock Exchange was the desire to preserve the chain's continuity. In addition, I wanted the public to share in my success, so that it could benefit from not just the low prices we offer, but also from our profits."
He added, "One of the things that helped the chain's growth and expansion was the IPO, first of all because of the transparency it provides, which is the basis of our business. If a company isn't afraid to be transparent, and its strategy is good for everyone, both the consumer and the investors, I recommend that it go for an IPO, because that can help its development."
Commenting on the huge increase in the number of the chain's branches over the past decade, Levy says, "Following the IPO, when I declared that I wanted to reach 30 branches, everyone wondered. Two years later, I said I wanted to reach 50, and eyebrows were again raised. We'll reach that in the coming months, with deployment from Eilat to Kiryat Shmona.
"Since I entered the stock exchange, the retail food market has changed. Competition has intensified, and everyone has started talking about the cheap prices. They didn't know us well enough before the IPO, but since then, we've helped lower the cost of living, and I estimate that without us, the average household basket of food items in Israel would cost 20-30% more than it does today." Levy adds, "The chain's expansion also substantially increased the number of workers it employs, and that's a very good deed that makes me feel pleasure, satisfaction, and successful."
"2017 will be better"
"Globes": Where do you see the Rami Levy chain in another decade?
Levy: "I believe that we'll continue to be trailblazers, and continue to adapt our strategy to consumers. Looking ahead, we see ourselves developing substantially in online sales, in branches within cities, and we want to also enter tangential fields, because the retail sector is very broad, and we're thinking about expanding our development in other areas to cause an upheaval like the one we've already caused in the market."
As an example, Levy cites the chain's mobile telephony business, about which he says, "We entered and turned things around, and we now have 150,000 subscribers, after growing correctly and cautiously, without a big commotion or debts, and without taking big risks, as did several of the competitors, who disappeared after making big investments. We act judiciously, with low costs that are good for everyone, and we've been making a profit since our first months of activity in this market."
Like most of his competitors listed on the stock exchange, especially Shufersal, Levy had a good year in 2016, following the collapse of the Mega chain. Levy predicts: "The current year will be better, because as far as we're concerned, we didn't feel the collapse of Mega last year, but we're feeling it now, and we'll also feel it next year."
Published by Globes [online], Israel Business News - www.globes-online.com - on May 11, 2017
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