The share price of G. Willi-Food Investments Ltd. (TASE:WLFD) fell sharply on the Tel Aviv Stock exchange yesterday, following an 8% drop in the share price of subsidiary G. Willi-Food International Ltd. (Nasdaq:WILC) on Wall Street on Friday on higher than usual volume, after the company reported that it had been notified by European dairy giant Arla Foods that Arla would end the exclusive distribution agreement with it at the end of this year. G. Willi-Food International Ltd. has a market cap of some $71 million on Nasdaq. G. Willi-Food Investments Ltd., which owns 61.9% of G. Willi-Food International, is traded on the Tel Aviv Stock Exchange at a market cap of some NIS 219 million.
Willi-Food imports, produces and sells food products. The company is effectively run by brothers Zwi and Joseph (Yossi) Williger, who regained control of the company after a prolonged and stormy battle with previous controlling shareholder Gregory Gurtovoy. Four months ago, Yossi Williger succeeded in obtaining the majority he needed to replace the directors on the Willi-Food Investments board with new directors representing him, thus completing the takeover of the company. Shortly afterwards, Willi-Food Investments CEO Iram Graiver was dismissed.
The largest shareholder in Willi-Food Investments is BSD, part of the pyramid of companies controlled by Gregory Gurtovoy's Israel 18. Williger, however, managed first of all to dismiss the board of directors of BSD and thus take over effective control of the company. BSD is listed on the London Stock Exchange, but trading in its shares has been suspended for eighteen months because of failure to publish financial statements on time.
Willi-Food Investments' management accused the previous management of being responsible for Arla's decision to end the agreement with it. That management "agreed to amend the contract with Arla, under which the exclusivity period was until 2020, knowing that a battle for control of the company was taking place." The amended contract stated that Arla would be entitled to rescind the contract in the event that Graiver ceased to be CEO.
Sources at Willi-Food Investment told 'Globes" yesterday that "the company is examining the notice received from Arla, particularly why the previous management signed a new agreement with Arla in December 2016, while a battle for control of the company was taking place, shortening the exclusivity period, which in the original agreement was until 2020."
Willi-Food's management suggests that this was a deliberate move designed to harm the new management of the company. "This comes in addition to other enquiries taking place in the company into the unlawful transfer of cash for the renovation of a closed hotel in the Czech Republic by the previous management, concerning which an investigation is being carried out by the Israel Securities Authority."
Sources close to the previous management of Willi-Food Investments said, "The agreements are defined by Arla as annual agreements renewed each January for one year."
Will Willi-Food try to conduct further negotiations with Arla? The company's management says that it "will demand that Arla should fulfil the terms of the original agreement as written, until 2020."
Willi-Food has distributed Arla Foods products in Israel since 2005. Arla is its most important supplier, with, among other things, its well-known butter brand Lurpak, and soft and hard cheeses, some of which are segment leaders in Israel. According to sources close to the company, Arla products generate about a quarter of Willi-Food's revenue.
"The end of the Exclusive Distribution Agreement with Arla may have a significant negative impact on the Company's operating results although the Company believes that it will be able to enter into agreements in the near future with alternative suppliers for a portion of the products currently purchased from Arla," G. Willi-Food International's notice to Nasdaq stated last week.
Published by Globes [online], Israel business news - www.globes-online.com - on October 23, 2017
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