Zara Israel in talks to buy Topshop from Sakal

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Sources inform ''Globes'' that Zara Group Israel is in talks to acquire 50% of fashion chain Topshop from Sakal Holdings.

Topshop is a fashion chain belonging to the UK’s Arcadia Group, Ltd. In Israel, the chain has ten Topshop branches, and four Topman branches, which operate alongside the women’s branches.

The company has stores in the Ramat Aviv Mall, Dizingoff Center, Arena Mall Herzliya, G Kfar Saba, Kanyon Hazahav Rishon Lezion, Kanyon Hagadol in Petah Tikva, Grand Beer Sheva, Mamilla Mall. Herod’s Promenade in Eilat, and the Eilat Ice Park Mall.

The company’s revenue is estimated at NIS 60-70 million per year, with an operating profit of 18-20%, although the company has suffered a blow to sales in recent months.

Negotiations are believed to be underway at a company value of NIS 40 million. Sources inform ''Globes'' that the deal being drafted between the two parties outlines a future BMBY (buy me buy you) process wherein the remaining shares may be purchased by one of the companies. This will allow Zara Israel to eventually buy complete ownership of the chain and of the brand.

Sakal Holdings is owned by Haim Sakal. The company operates 32 branches of 7 fashion chains, all of which are quality brands. Other than Topshop and Topman, Sakal Holdings operates two additional Arcadia Group branches: Dorothy Perkins (three branches) and Miss Selfridge (three branches). Sakal Holdings also operates A&F Brands Factory Store (6 branches), Quicksilver (5 branches), and all O’Neill brand stores.

NIS 1.1 billion in revenue

The latest developments follow a year in which Sakal Holdings lost its rights to Tommy Hilfiger, which went to Al Sard Group. The brand accounted for roughly half of Sakal Holdings’ sales. As reported by “Globes,” Tommy Hilfiger sales in Israel were NIS 83.5 million in 2012 (excluding VAT), and the operating profit was NIS 16.9 million (20.2% of sales).

Yesterday, Sakal Group, owned by brothers Soli (Haim’s father) and Meir Sakal, announced it is in talks to sell 50% of its fashion operations to Brill Fashion, Ltd., for NIS 95 million. Previously, Sakal Group and Sakal Holdings had tried to merge the two companies’ operations, but if the talks with Brill end in an agreement, the merger will not happen.

Zara Israel is one of Israel’s two biggest fashion companies. Estimates are that the company’s revenue was NIS 1.1 billion in 2013. The group holds Zara (22 branches), Pull and Bear (25 branches), Gap (8 branches), Bershka (7 branches) and Massimo Dutti (2 branches). The company also operates 2 branches of the Nike franchise in Israel, and additional Nike branches abroad.