The rumor had been circulating for some time, that brothers Zwi and Yossi Williger wanted to find a partner for their import company Willi-Food Investments (TASE: WLFD), or even sell the thing outright.
In late December 2006, TheMarker reported that the Disney family's fund Shamrock was negotiating an investment according to a company value of $60 million. Now Arcadi Gaydamak is buying a 45% interest at 30% above that company valuation.
The talks with Shamrock didn't go anywhere. One reason was Shamrock's annoyance that in parallel the brothers were negotiating to sell Willi-Food to others. Another was Shamrock's irritation at the leaks. Shamrock, in short, walked.
And the leaks trickled on: Ishay Davidi's First Israel Mezzanine Investors was also mentioned as a potential buyer, though nobody ever confirmed that. Just last month the Swiss giant Nestle, which owns the controlling interest in food manufacturer Osem (TASE: OSEM), was mentioned as wanting to buy Willi-Food group company Gold-Frost, which is listed in London. That rumor actually won a denial.
So it seems that Gaydamak's appetite for Israeli listed companies fell like manna from Russia on the brothers.
So, what is Willi-Food Investments? It imports foodstuffs to Israel and markets more than 400 types of foodstuffs here and overseas, too. Its products range from canned pickles and fish to jams and dried pasta. Its market cap on the Tel Aviv Stock Exchange is NIS 233 million and it has group companies listed for trading on Wall Street and in London.
G. Willi-Food International (Nasdaq: WILC) (62%), listed on Nasdaq, has a market cap of $87.3 million. Then there's Gold-Frost, listed on London's AIM at a market cap of nearly $30 million, in which the Israeli parent company owns 46%, indirectly.
Gaydamak reportedly means to buy 45% of the Israeli parent company according to a company value of $80-90 million. The Williger brothers will retain 8% of the company's shares and will get NIS 170 million for the rest, which confers a premium of about 60% over Willi-Food's market cap in Tel Aviv.
For the first quarter of 2007 Willi-Food reported a 31% year over year increase in sales to NIS 71 million. It netted NIS 4.7 million.
In the parallel quarter it netted NIS 17.6 million, but most of that derived from one-time gains from floating Gold-Frost in London.
As of the end of the first quarter, the company had NIS 170 million in cash and liquid equivalents.
The company's management has targeted the American market for kosher food as its biggest growth driver in the future. In fact, the American kosher foods market doesn't only target Jews, but also members of other religions who believe that kosher food is healthier.
The American kosher foodstuffs market is believed to have a turnover of $15 billion a year, and is growing by 17% a year.
An easy way to tap into that market is by buying a company that's already in the niche. Willi-Food achieved that end by buying Laish Israeli Food Products, which distributes kosher foods in New York, New Jersey and Connecticut. The Israeli company agreed to pay $3.7 million for Laish.
Willi-Food also set up a joint venture in the U.S. that markets kosher foods.
What is it that attracted Gaydamak to this company? Maybe when he realized that removing the pig from Tiv Taam would be a lot harder than he'd envisioned, he decided to play it safe and opted for this company that nary a ham has crossed its threshold. Its very being is based on kosher foods, and it has already made moves to advance its ambitions abroad. With his wealth, Gaydamak is in a position to help it to greatly forward that aim.
But buying a food marketer at a multiple of 19 (assuming it nets NIS 20 million this year) is a leap of faith. A rival company Neto, which markets frozen foods, is traded at a multiple of 12. The premium Gaydamak is paying is not small.
Many say that what Gaydamak really wants is not a retailer, it's legitimacy in Israeli society. Obtaining a certificate of kashruth for himself from the people, as it were, will take time. But he can start with the ready-made certificate of kashruth of Willi-Food.
