Clubmarket mulls public flotation
Could shares in the collapsed Clubmarket supermarket chain be registered and traded on the stock exchange by the end of the year?
Could shares in the collapsed Clubmarket supermarket chain be registered and traded on the stock exchange by the end of the year? This remarkable scenario was suggested - even recommended - yesterday by Shlomo Nass and Gabi Trabelsi, the court-appointed trustees for the company.
Clubmarket filed for court protection from its creditors last month after accruing debts of NIS 1.4 billion, owed mostly to its suppliers and four banks. The court granted protection until August 17, and the trustees have since offered the company for sale in the hope of a quick deal. Otherwise, the group faces closure, as Judge Varda Alshech made quite clear: If the owners were not prepared to dig deep into their own pockets to save the company, she would not be encouraged to extend the court's protection.
At a news conference held yesterday, Nass and Trabelsi outlined a plan to register Clubmarket as a publicly traded company and to issue shares, as soon as possible, as one of the options. However, Nass said that the preferred solution was "to sell the chain as a single unit rather than in parts."
The plan for a quick conversion of the supermarket into a publicly traded company would require the approval of Clubmarket's creditors to convert some of their debts owed into shares in the chain, the managers explained. This assumed that some creditors - many of whom are small suppliers, doubtful about ever seeing their money back - may prefer to hold shares, traded publicly, that they could then sell. The plan also assumes that part of the sums owed to the creditors would be paid in cash from the proceeds of selling the chain.
"In our opinion, despite the situation in which the company finds itself today, for someone who wants to get into the retail market in Israel, here is a rare opportunity," Nass said. "Whoever understands this sector can make a quick decision. Without mentioning names, I can say that at least one investment bank and a foreign investment fund that checked the plan have said that they are planning to make an offer to buy the chain."
Running a retail chain is not simple matter, and for this reason the trustees are keen to make a quick sale. Clubmarket is estimated to be losing some NIS 1 million each working day. Shoppers may be drifting back to the stores, prompted possibly by the heart-rending TV appeals by Clubmarket staffers, but sales are still 20 percent down from the pre-protection days.
Nass and Trabelsi are giving potential buyers only until August 16 to submit their bids. At the same time, they requested - and received - a week's extension on the court protection, with the next court hearing scheduled for August 25, by which time they hope to submit an offer from a serious buyer and ask the court's approval.
The trustees stressed that it was far better to transfer the ownership of the business to the new owners as soon as possible, rather than have them continue to manage the company until it recovered. "From our point of view," Nass added, "the buyer can take over the chain on September 1 and enjoy the enhanced sales of the holiday season."
Nass and Trabelsi argued that the company, if publicly traded, could have capital of some NIS 1 billion. How come? "Clubmarket has debts of some NIS 1.3 billion and a deficit of NIS 500 million in capital," Trabelsi explained yesterday. "If all the debt is converted into shares, then [the chain's] shareholders capital will reach NIS 800 million. This will be a company with a clean slate, no debts - and with capital injected by the new buyers, the shareholders' equity could reach more than NIS 1 billion."
According to Nass, clause 350 in the Companies Law, which addresses the issue of companies reaching arrangements with their creditors, allows for such a speedy conversion to a publicly traded firm. The process is applicable in this case, he added, because if all creditors convert part of their monies owed into shares, there will be sufficient shareholders to register the company on the exchange. The two stressed that the proceeds from any sale of Clubmarket will be destined - either in full or in part - to pay its creditors, in cash.
Rotem Starkman and Anat Roeh add: The owners of the failed Clubmarket chain, the Mozes-Borovich and Rosen families, submitted a letter to the Tel Aviv District Court yesterday laying out the circumstances behind the company's collapse. The 10-page submission also included such "facts" as the public pillorying the owners have weathered since the company filed for bankruptcy protection and how they have fought for Clubmarket's reputation.
"For two weeks now," the letter said, "the shareholders have been forced to absorb a tirade of unbridled attacks and all sorts of baseless slanders by interested parties and competitors. In these difficult times, the media has been full of venomous words against the shareholders while harming the company's good name.
"These utterances have been malicious nonsense, simply ingratitude by the many who have earned a living and profited on the backs of the company and the shareholders over a lengthy period of time. These attacks are fed by incomplete facts and distortions."
It was the design of Clubmarket's owners, the letter continued, to set up an exemplary food retail chain to compete with the two largest chains, Supersol and Blue Square. "To this end, they bought [in 2001] what had been a random collection of shops and stores of various sizes in various locations, for some NIS 439 million."
In the years since, they continued, they had spent NIS 8 billion on its suppliers, paid NIS 900 million in wages and NIS 130 million in interest payments alone to the banks. In 2005, they had injected further sums into the chain. They expressed "deep sorrow for the workers, suppliers, creditors and others," empathized with their pain and were acting to minimize the damage caused.