Yenot Bitan struggling to swallow Mega

Nahum Bitan

D&B reports that the company's payment ethic has deteriorated in 2019 and owner Nahum Bitan has injected NIS 300 million into the chain.

What is going on at Yenot Bitan? It has been three years since Nahum Bitan acquired retail supermarket chain Mega Ba'ir, and the challenge of digesting the stores has not become any easier. After "Globes" reported last October that Nahum Bitan was considering a NIS 300 million private loan from a number of financial institutions, sources inform "Globes" that he recently injected tens of millions of shekels into the chain.

"Globes" has also heard about complaints by suppliers about delays in the group's payments, requests for unilateral extensions of payment terms, unilateral postponements of payments, requests to return merchandise, etc. It is alleged that sales are down at chains owned by the Yenot Bitan group. The suppliers say that most of the delays last for a day or two, while one supplier said that the delays were likely to last for four days, or even a week.

These allegations are supported by a report by credit rating company D&B indicating that the company's payment ethic has deteriorated since the beginning of 2019. For this reason and because of other indications, the consultant company significantly downgraded Yenot Bitan's risk rating. Yenot Bitan said that the 2018 sales turnover of the its two chains, Mega and Yenot Bitan, was NIS 4.7 billion.

The purpose of the NIS 300 million in financing from financial institutions and other parties sought by Nahum Bitan in October was to pay the rest of the price for its acquisition of the Mega chain. He also negotiated with US investment fund Blackstone for financing in the form of an investment or a loan. As far as is known, no deal or loan resulted from these negotiations.

The Yenot Bitan group also replaced most of its senior management over the past year, appointing new commercial, marketing, operations, human resources, and financial managers. Various streamlining and upgrading measures were also taken, such as cutting back on the range of products. These measures were part of Nahum Bitan's effort to turn his chain into a well-established and financially and managerially stable group in order to win the confidence of potential investors.

Yenot Bitan is a private retail food company. Three years ago, Nahum Bitan acquired the Mega Bair chain, instantly becoming the owner of Israel's second largest retail group, with an annual sales turnover stated by the company to be NIS 5.5 billion as of 2017. The group has three chains - Yenot Bitan, Mega Bair, and Shuk Mehadrin (aimed at the haredi (Jewish ultra-Orthodox) market) - and nearly 10,000 employees. A private company, Yenot Bitan does not publish its financial statements, so its financial data are unknown.

Yenot Bitan said in response, "The chain regularly takes streamlining measures to improve its growth and profits. It is in the midst of a strategic process focusing on its fresh food departments and streamlining its inventory by using up surpluses, optimizing the range of its products, and cutting down on inventory days. This strategy is already proving itself. We posted growth in the fresh food categories, such as over 5% growth in dairy products, 18% in fish, and 8% in fruits and vegetables. At the same time, we are continuing to invest in renewing our branches, and in recent months, we upgraded four flagship branches and opened our first branch in Beer Sheva.

"Mega is under a trustee, and therefore has no line of credit from credit institutions, a situation faced by no other chain in Israel. At the same time, Yenot Bitan has already paid NIS 330 million, 70% of its debt, and is continually repaying the debt on schedule. Furthermore, the Yenot Bitan group has close connections with credit institutions, and no change has occurred in relations with them. In addition, Nahum Bitan recently injected tens of millions of shekels in to the chain.

"We are in direct contact with the suppliers, and are coordinating with everyone with a delay in a payment to which they were entitled."

Published by Globes, Israel business news - en.globes.co.il - on August 5, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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