Could it be that after countless declarations over the years about the privatization of Israel Postal Company and one change after another in the format of the sale, buyer of the company will be announced a month from now? For years, Israel Post was associated with inefficiency, huge losses, and injections of billions of shekels from the state to keep it in existence. If the process does reach a conclusion and the name of a buyer, or to be more precise of a consortium of buyers, is announced, then in three f four months’ time Israel Post could actually be sold and cease to be a government company.
Two bidders remain
The sale of the Israel Post cannot be taken for granted. Of a long list of potential buyers mentioned in the press and media, as far as is known only two consortia remain in the picture. The first is led by municipal services company Milgam, owned by the Weil family, and insurance group The Phoenix Holdings (TASE: PHOE), while the second consists of Delek Israel (TASE: DLPR) and retailing magnate Rami Levy.
Previous plans for the privatization of Israel Post called for a stake to be sold to a private investor, to be followed by a flotation on the stock exchange. The current plan is for the sale of the company outright to private hands. As for the company valuation that the state can expect in the sale, it’s too early to tell. Even after the aggressive recovery program that it underwent in 2022, Israel Postal Company still has a deficit on shareholders’ equity of NIS 550 million (as at the end of September 2023), and the value of its real estate is uncertain.
In the past, the company was valued for the purposes of privatization at NIS 1.5 billion or more, but the current estimate is that the bids will value it at less than NIS 1 billion. Against the company’s main assets - parcels post, real estate, and the Postal Bank - those who have expressed an interest in buying it point out its high salaries expense, lack of clarity about the value of the real estate, and exposure, without indemnity, to taxation of the bank.
"Anyone who knows how to enhance the delivery of parcels from overseas, a service that Israelis use a lot and which is an area in which Israel Post has a very large market share, might be able to turn it into a profitable business. The same applies to the Postal Bank. In any event, whoever goes into this investment will have to work for the very long term," a market source said.
The latest recovery plan, in which Israel Postal Company parted from about 1,000 employees and the state injected an estimated NIS 1.7 billion into the company, was led by chairperson Mishael Vaknin and CEO David Laron, formerly a senior manager at supermarket chain Shufersal, and it is they who will manage the sale process. This week, the company held an online meeting with potential bidders who had already been in the information room, at which Laron and the managers of the technological and service divisions answered questions. This was further to a similar meeting last week that focused on financial matters. According to sources present at that meeting, Laron warned that if the auction did not go well, Israel Post was liable to find itself in severe financial difficulties later on.
The effect of the recovery plan was clear in the results for the first nine months of 2023, in which revenue rose by 12% in comparison with the corresponding period in 2022, to NIS 1.27 billion. The company posted a net profit of NIS 176 million for the period, following a loss of NIS 1.05 billion in 2022 as a whole (of which NIS 790 million was severance pay). The company recently announced that it made a profit of NIS 32 million in 2023 as a whole, excluding capital gains.
The recovery plan was not the only factor in Israel Postal Company switching to a profit last year. Documents presented to bidders for the company show financing income of NIS 199 million in 2023, versus NIS 51 million in 2022, thanks to the sharp rise in interest rates. It follows that the expected decline in interest rates will hit this income stream in the future.
The next stage in the sale process will be the convening of the Knesset Finance Committee to approve the privatization terms, to be followed by the submission of bids and the selection of a winner, a process that, as mentioned, is meant to take place in a month’s time.
Published by Globes, Israel business news - en.globes.co.il - on April 10, 2024.
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