Last update - 00:00 12/06/2007
It smacks of the right taste, says Gaydamak of his purchase
By Shlomi Shefer
He puts an emphasis on synergy and correct pricing. Billionaire Arkadi Gaydamak told TheMarker that his recent deals were closed at appropriate prices, after much thought and with no hasty decisions. He also explained the sources of his funding and why the deals were transacted just now.
Why did you buy Tiv Taam, and not Super-Sol or Blue Square?
"Because those chains are not for sale. True, Tiv Taam is small, but it is very dynamic and can achieve a market share just like that of the other chains. I have no doubts that it sells good products and offers good services, and I am confident that in another few years it will be as big as the competitors you mentioned."
Its market niche is in non-kosher products, particularly pork. If you stop selling those, will it not harm the chain?
"I think that people who buy at Tiv Taam do so for the quality of the products. True, some of them are not kosher, but pork products are a small percentage of total sales, not the mainstay. I believe that if we stop selling pork the damage to business will be slight. From a social point of view, I believe we have lost. Jews today are far away from tradition after many generations of being much closer. Some people think that if we don't allow them to buy pork, we are doing something undemocratic, but that has nothing to do with it. This is something we do because we are Jews, and we are keeping the traditions."
Will you stop selling all the non-kosher products, or only pork?
"We will do only the minimum in order not to affront tradition. The chain has both restaurants and stores and a large percentage of our customers are traditional. Unfortunately, I do not keep all the Jewish precepts, but [not eating] pork is the minimum. We will stop selling provocative items."
You bought the company for 83 percent more than its market value. Do you still think that price was realistic?
"I hope to make a profit on this deal, as I did with all the other companies I purchased, all of which are now trading at more than I paid for them. I think this will also happen with Tiv Taam."
How did you arrive at a company value of NIS 820 million?
"My rationale is that supermarkets worldwide are traded at 60 percent of their sales turnover. If Tiv Taam has annual sales of NIS 1.5 billion, then the chain is worth about NIS 900 million."
But retail sales were only NIS 600 million, and total sales were about NIS 1 billion in 2006.
"The 2007 figures I have indicate annual sales of NIS 1.5 billion. Even though Super-Sol and Blue Square have five times that sales volume, they don't have our dynamism. We have at least three times their potential. I think that within two years we will be able to more than double Tiv Taam's sales - and keep going from there. For that we will need to open more stores. That is what we are going to do, but this will be harder for our competitors, as they are already a countrywide chain. We can start to sell in places where they already have branches, and that is our plan."
Israel has already had a third supermarket chain, Clubmarket, and you know what happened to it. It collapsed due to price wars. Aren't you worried this will happen to you when you compete against the big chains?
"That won't happen to us. One of the reasons I bought the chain is that it has had some rough spots in the past due to negative advertising and poor financial management. Amit Berger took the company and fixed that situation completely. This tells me that the company is dynamic and the hard times are behind us, so the chances of hitting another crisis are much smaller."
Are you planning to keep the current management?
"Yes, at least for now. They have done good work in the past few months."
Are you planning any more deals?
"I make deals when they are synergistic. For example, Tiv Taam needs another 100 stores with a total area of 100,000 square meters. This is something that was planned before my investment in the chain. I own Ocif, which can produce the real estate at competitive terms. That is a lot of activity and since we know that Tiv Taam will lease the space, and how much the chain will pay, we can do it. I also have the controlling stake in Gilon Investments, which can help with the financing. Everything is synergistic.
"There are parts of Russia that I am developing, and they need a lot of supermarkets, so I might open Tiv Taam branches there.
Some people say you make deals to be popular. "That's not true. Anyway, I'm not just popular, I'm very popular."