"We will do everything possible to find a buyer for the Migada plant in Kiryat Shmona and the SLE distribution company," Teva Pharmaceutical Industries Ltd.'s (NYSE: TEVA; TASE: TEVA) management wrote to the company's employees in a letter explaining what would happen to the company's sites in Israel. SLE, now classified as not part of Teva's core business, was previously regarded as one of the company's foundations.
"The company now known as Teva was founded in Jerusalem in 1901 as a small company importing drugs, mainly from Europe, and distributing them throughout Israel on camels and donkeys," Teva's website says. Founders Chaim Salomon and Moshe Levin were joined a few years later by another partner, Yitschak Elstein. They were relatives, and their names provided the company's initials: SLE. SLE was later merged with other companies that created the current Teva, and became Teva's fully-owned distribution company. The founders' families remained connected to Teva; Amir Elstein is currently a director in the company. Late Teva CEO and chairperson Eli Hurvitz married Dalia Salomon from one of the founding families. Their son, Chaim Hurvitz, is a former Teva executive and director. SLE's close connection with Teva is not just history, however. A few years ago, Teva invested over $100 million in the construction of its global logistics center in Shoham, near Modi'in, and this center currently coordinates all of SLE's distribution activity. Travelers on Highway 6 can view the logistics center, which has "Teva" displayed on one side and "SLE" on the other. Actually, it could be said that the fate of the logistics center is another sign of Teva's inconsistency in recent years. After an investment of more than $100 million, the center began operating only seven years ago, when Teva celebrated its construction with great fanfare. Now a large part of the center is being put up for sale.
The cornerstone for the logistics center was laid in May 2009, and then-CEO Shlomo Yanai said at the ceremony that even though 96% of Teva's sales were from outside of Israel, Teva was an Israeli company. "On the average, one jumbo jet a week takes off from Ben Gurion Airport for the US filled with drugs for the US," Yanai said at the time.
Almost two years later, Teva inaugurated the center in a major event attended by many dignitaries. Late Israel President Shimon Peres was given a tour of the center and explanations from Yanai and Eli Hurvitz. Peres praised Teva, "which was founded not only with vision, but also with amazing planning," adding that Israel should be a global center for the pharma industry. "Teva is a global Israeli company. This is our home and our source," Yanai said. "Teva invests over $1 billion every year in Israel, and $2 billion more in R&D in Israel - investments that add 600-700 employees each year, from all sectors of Israeli society."
Competitor Novolog held IPO this year
SLE is a profitable company, and it is a real possibility that Teva will be able to sell it to another concern - either a strategic buyer, such as a competing company or a foreign company interested in operations in Israel, or a financial buyer, such as a private equity fund. SLE's main competitor is Novolog, which become a public company traded on the Tel Aviv Stock Exchange (TASE) a year ago, with a NIS 512 million market cap. Novolog's prospectus before its IPO stated, "There are five leading companies in drug distribution in Israel," with the others being Teva's SLE, Promedico, Perrigo PLC, and Chemipal Ltd. (TASE:CMPL). Novolog has a 40% market share in financial terms, and in contrast to SLE and the others, it is not connected to the company producing the drugs; it merely distributes them.
Published by Globes [online], Israel Business News - www.globes-online.com - on December 18, 2017
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