Two and a half years after gaining control of Synergy Cables Ltd. in a debt settlement, private equity fund Fortissimo Capital is laying off most of the company's employees, including most of its management, sources inform "Globes." The cutbacks are part of an attempt to save the company, given the difficulty it is having competing with the challenging market conditions and large losses, which are estimated at tens of millions of shekels a year.
Synergy Cables, which manufactures and markets electric power transmission cables, is located in the industrial zone near Sderot. The company is currently in the midst of extensive cutbacks, which are expected to leave it with only 50 employees, compared with the 250 it had in 2015 after it was acquired by Fortissimo.
As far as is known, since acquiring the company, Fortissimo has invested more than NIS 100 million in it, on top of the NIS 15 million it injected into Synergy Cables, together with previous controlling shareholder Steven Elbaum. This payment, which was part of the debt arrangement for the company, was designated for meeting Synergy Cables' immediate obligations at the time, including its workers' salaries.
Fortissimo is currently the sole owner of Synergy Cables. As was the case with the Phoenicia glass plant, which also suffered large losses and underwent a turnaround under its management, Fortissimo is not expected to give up on Synergy Cables. The current layoffs are part of Fortissimo's measures for bringing the company back to profitability. Headed by CEO Yuval Cohen, Fortissimo is one of the most prominent and successful private equity funds in the local market, and has raised $1 billion in four funds.
Synergy Cables CEO Ephie Koltin said today, "Synergy Cables is making every effort to survive, but it is very difficult to do this in the current state of the market. We are therefore cutting back on our production lines and adapting them to the quantities we supply to Israel Electric Corporation (IEC) (TASE: ELEC.B22) in a tender we won, to infrastructure projects, and to exports, mainly to North America for activity by renewable energy farms. We will reduce our staff, and retain production lines with a high output in order to maintain a reasonable level of sales."
Koltin added, "Synergy Cables is the only power cables manufacturer in Israel. Its plant is classified as a preferred enterprise and a basis of national infrastructure, and it is a strategic manufacturer for IEC. The plant's ability to survive depends on sales to IEC and the domestic market, and we are currently being trampled by Turkish boots. 80% of the NIS 1 billion in cable sales in Israel are imported from Turkey. Not all of these cables meet the standard, and they are being sold at dumping prices.
"We are therefore unable to compete for business in the local market. Whenever IEC can buy imported cables, it does so, and this is destroying us as a company. If our plant is completely eliminated, it will bring about a situation in which there will be no cable manufacturers in Israel, and within a few months, the result will be a rise in cable prices. In addition to the price, keep in mind that IEC is national infrastructure, and there is a significant difference in quality between our cables and the imported ones."
Fortissimo gained ownership of Synergy Cables as part of a debt arrangement approved by the Beersheva District Court in early 2015. The company's major creditors at the time were bondholders, with a debt of NIS 90 million, and Bank Hapoalim (TASE: POLI), to which the company owed NIS 40 million. Following the debt arrangement, in which 70% of the debt was written off, Synergy Cables became a private company.
Published by Globes [online], Israel Business News - www.globes-online.com - on June 6, 2017
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