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Milked It Dry and Moving On? Apax Likely to Sell Tnuva, Say Kibbutz Sources

If Apax really does decide to bow out of Tnuva, say industry sources, a shelved plan for the company's takeover by Mivtach Shamir and the kibbutzim could come back to life.

Apax Partners will be seeking a buyer for its controlling interest in Tnuva soon, surmise the international investment fund's partners in the fresh foods manufacturing giant - a group of kibbutzim.

The agricultural cooperatives retained a 23.2% stake in Tnuva, which they hold through their economic corporations. Mivtach Shamir, an investment company belonging to Meir Shamir, owns a 20.7% interest in Tnuva as well.

British backers of Apax Partners have realized that public opinion of Tnuva has turned against the cooperative, which controls more than about 60% of Israel's dairy market. It also sells fresh fish and meat. The resignation of Tnuva's chairwoman Zehavit Cohen on Sunday will expedite Apax's exit from Tnuva, surmised top executives at the kibbutz corporations yesterday.

As an investment fund, Apax does not usually manage the companies it owns itself: It's in the game for profit. The top people at Apax may feel the investment in Tnuva has little more added value to provide.

Until now, Apax has jealously guarded Tnuva's financials, to the point of causing its partner in Tnuva, Mivtach Shamir, to be suspended from trading on the Tel Aviv Stock Exchange (For more on that, see Page 8 ). Shortly after the announcement of Cohen's resignation as chairwoman, Apax agreed that Tnuva would shortly release its financial statement for 2010. Meanwhile, the executives at the kibbutz corporations surmise that Apax will demand a company valuation of NIS 6 billion for Tnuva, when it comes to sell its controlling interest.

When Apax bought that controlling interest three years ago, in 2008, it paid according to a company valuation of NIS 3.8 billion. If the figures are roughly accurate, Apax will have achieved 60% returns on its investment. That is a remarkable rate of return on a domestically oriented food company like Tnuva, with no real international operations. Moreover, by extracting dividends, the controlling shareholders have already returned 45% of their investment.

If Apax really does decide to bow out of Tnuva, say industry sources, a shelved plan for the company's takeover by Mivtach Shamir and the kibbutzim could come back to life. Mivtach Shamir and the kibbutzim jointly own 43.9% of Tnuva: All they would need (theoretically ) is 7.1% more to achieve control. However, sources at Apax surmise that the investment fund is highly unlikely to carve off a 7.1% chunk to sell separately from the rest of its shares.

Therefore, if Mivtach Shamir and the kibbutzim want to take over Tnuva, they'll have to bring one or more partners into the deal. Plenty of potential investors - Israeli and international - would like to join in. Apax may or may not feel there's more value to be had there, but others feel there is, given that Tnuva remains Israel's biggest food producer.

The public protest over the cost of living was triggered four months ago by the dairy companies' move to raise the price of cottage cheese to about NIS 7.50. Tnuva, as the biggest supplier of the supper and breakfast staple, became the target of intense anger. Then, matters began with a boycott of cottage cheese: Two weeks ago, students declared a boycott of Tnuva specifically, which indeed hurt its sales. On Sunday, Tnuva - followed by Israel's two other big dairy companies, Strauss and Tara - finally capitulated to the pressure and said it would lower prices.