Rami Levi
Rami Levi Photo by Ofer Vaknin
Text size

Rami Levi is negotiating to buy 53 branches of the Mega supermarket chain for an undisclosed amount.

Levi approached Antitrust Commissioner David Gilo a few days ago to see if such a move would be approved on antitrust grounds.

The Rami Levi-Shivuk Hashikma independent supermarket chain operates only 24 stores, and is negotiating with David Weissman's Alon Holdings Blue Square Israel, which owns Mega. Mega operates over 200 stores.

The stores involved are mostly of the Mega Bool discount brand, but the final list still has yet to be set as the two sides are waiting for antitrust approval in principle.

If the sale goes through, it is possible Mega will stop operating its deep discount format, which it launched at the end of 2008. Mega would continue, though, with its neighborhood format Mega Ba'ir, which has higher profit margins.

The sides have also not yet agreed on a price, or how the deal would be carried out. One possibility under discussion is forming a jointly-owned subsidiary to own the stores, which would be managed by Levi. A second option would be to set the payments based on future sales or profits.

Rami Levi declined to comment.

Mega said: "We will not respond to rumors on the matter."

Mega announced in its first quarter financial reports that it was considering getting rid of 10 money-losing stores, while opening nine new branches elsewhere. Most of the new stores would be Mega Ba'ir.

Mega is the country's second largest supermarket chain with a 11.7% market share of NIS 56 billion in annual supermarket revenues. Super-Sol is Israel's biggest chain with a 21% share of the market. Rami Levi is the third largest with a 4.6% share.

Alon Holdings lost NIS 6.3 million in the first quarter of 2012, compared to a NIS 30 million profit in the same quarter of 2011.

Rami Levi has the highest sales per square meter of any Israeli supermarket chain.

Levi is well known for his sales and low prices, such as his famous "a chicken for a shekel" campaign. He also founded a virtual cellular operator and is a major real estate investor.

"Assuming Rami Levi buys about 50 Mega stores and their sales are similar to those of his own stores today, he will reach a 12% to 15% market share and will be the second largest player in the market. Mega will drop to a market share of only 6% to 7%," said Tamir Ben Shahar of the Czamanski Ben Shahar consulting firm.