Victory Supermarket Chain Ltd./ (TASE: VCTR) has signed an agreement to acquire rental rights to five branches of the troubled Mega supermarket chain at a cost of NIS 7.5 million, plus VAT.
The branches are in Akko, Afula,, the Tel Aviv Central Bus Station, Rishon Lezion (in the Nobel Prize neighborhood) and Kiryat Yam (in the Psagot Yam neighborhood).
Victory said, "The acquisition includes all the rights to the stores, including the equipment in them." Completion of the deal is subject to several conditions, including the agreement of the property owners and approval from the Antitrust Authority director general.
A northern foothold
Victory, controlled by the Ravid family, is thereby expected to increase the number of its branches from 31 to 36. The Victory share price responded positively to the news, completing a rise of over 30% over the past year and pushing the company market cap up to NIS 380 million.
Victory CEO Eyal Ravid said today, "The branch acquisition deal, which comes on top of the opening of a 650-sq.m. branch on Dizengoff St. in Tel Aviv, substantially boosts the chain's sale area, especially in places where we haven't had a presence. Victory is reinforcing its foothold in northern Israel with branches in Kiryat Yam, Akko, and Afula, and in central Israel with another branch in Tel Aviv and a branch in Rishon Lezion."
Ravid added, "The expected sales growth will help improve our terms of trade and leveraging of the chain's operational infrastructure. We plan to have the new branches match the operating parameters of the existing branches."
Following the Mega chain's deep crisis in recent months, it decided on several cost-cutting measures, including the closure of over 30 branches, in which a large number of its competitors have expressed interest. Victoria also wanted to acquire the business of Mega's Eden Teva organic food chain, and made an offer to buy eight of its branches, but another competitor, Tiv Taam, eventually bought these branches.
Victoria's sales rose 10.5% to NIS 471 million in the first half of 2015, supported by the opening of new branches, despite a 1.4% drop in same stores sales. As a result of the market slowdown and the price war between the chains, Victoria's operating profit has been declining, and its net profit was down 5.5% to NIS 9 million.
Published by Globes [online], Israel business news - www.globes-online.com - on October 21, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015