Steimatzky - Tchetchik - 14.3.12
A branch of the Steimatzky bookstore chain. Photo by Daniel Tchetchik
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Iris Barel, CEO of the Steimatzky bookstore chain, is trying to organize a group of investors to help her purchase the chain from its owner, the Markstone Capital Group.

Barel wants investors to help her raise money that she cannot raise on her own, TheMarker has learned. After the purchase, she wants to serve as Steimatzky's chairwoman and be in charge of development.

Barel has been CEO of Steimatzky since 2006, a year after Markstone acquired the chain from Eri Steimatzky for a sum estimated at $50-$60 million. Barel replaced Yehoshua Mazliach, who was CEO during the 30 previous years.

Barel became CEO of Steimatzky without previous experience in the book world; she had specialized for 15 years in the insurance market. In her last position before moving to Steimatzky, she served as vice president of Clal Insurance company. Prior to that, she was CEO and a partner at Mivtach-Simon Insurance Agencies.

Meanwhile, Markstone has also been discussing the sale of Steimatzky with three other businessmen: Hagai Shalom, owner of Haargaz and the Tiv Taam; Rami Levi, owner of Rami Levi Hashikma Marketing; and Rami Shavit, owner of the Hamashbir Lazarchan group.

Asked for comment, Shalom said, "We speak to many companies, but these are not serious contacts or anything that is on the agenda for us at the moment." Levi said, "They approached me, but I wasn't interested."

Given the fund's lifespan, Markstone should sell Steimatzky before the end of 2013, though an additional two-year extension is possible. In 2008, the fund held talks with the IDB Group's Super-Sol supermarket chain. The parties agreed in principle that Markstone would sell Super-Sol 20 percent of Steimatzky for $13 million and transfer the rest of the shares later on. But IDB subsequently withdrew from the transaction.

Super-Sol's announcement to the stock market at the time said the parties would discuss the transaction again in the future. Informed sources attributed the withdrawal to IDB's fear of a boycott against it by the ultra-Orthodox community, since several Steimatzky branches are open on Shabbat. The group is even said to have received threats. But Super-Sol denied that fear of a boycott was behind the decision.

Blue Square, which operates the Mega supermarket chain, was also interested in purchasing Steimatzky at one time.

For the past year and a half, Steimatzky has been promoting an aggressive policy of special offers. Its competitor, Tzomet Sfarim, has had such a policy for the past five years, in which it offers four books for NIS 100. Initially, Steimatzky opposed this policy, claiming that Tzomet Sfarim was encouraging contempt for books and causing serious damage to publishers and writers. But it later changed its mind, on the theory that "If you can't beat 'em, join 'em," and began offering discounts as well.

Many industry sources say Markstone should sell Steimatzky as soon as possible, since as a fund nears the end of its lifespan, it loses its power in negotiations with potential buyers. But others say Steimatzky would be better off waiting until a new bill regulating book sales is enacted into law, since the law might be to its benefit. The bill would prohibit bookstores from offering discounts on books during the first 18 months after their publication.

"Markstone purchased the company at a crazy price-earnings ratio and didn't understand what it was getting into with Steimatzky," a senior book industry executive said. "In effect, it got in during the craziest years of the book market in terms of competition and special offers. The Markstone people are not retailers, they're financiers."

About a year ago, it was reported that Markstone owed Bank Hapoalim NIS 134 million because of Steimatzky.

Another book industry source said Steimatzky has several specific problems: "They lost a lot of money in the huge store they opened on Mamilla Boulevard in Jerusalem, and the size of the store was even reduced significantly because of that. In addition, all the special offers lead to an erosion of profitability, and the customers' club also requires outlays."

Steimatzky also has large expenditures for leasing and management fees paid to the malls where the chain's stores operate.

"Markstone sold Dapei Zahav (Israel Yellow Pages ), Netafim irrigation equipment and the Prisma Investment House," said an industry source. "Now it's Steimatzky's turn. Steimatzky will be sold in the end, and the price will be relatively good. But you will need a very specific company to want to purchase the chain - a company with operational synergy, a chain from abroad that is interested in entering the Israeli market, or someone interested in the Steimatzky brand name. It's not easy, but it will happen."

The Markstone fund said, "It's no secret that there are groups that are interested in a variety of companies in the Markstone fund portfolio. Each inquiry is examined individually." Iris Barel declined to comment.