Granite Hacarmel yesterday sold its wholly-owned gas station chain Sonol to Dudi Wiessman's Dor Alon. Wiessman and partner Shraga Biran paid $155 million to Granite shareholders Glencore and the Borovich family.
The deal includes a takeover of subsidiaries and Granite's 13-percent stake in Pi Glilot. The deal does not include Sonol's 50-percent stake in cooking gas company Supergas and five real estate properties.
The deal is subject to regulatory approval.
The deal will substantially improve the financial structure of Granite, which will post a capital gain of NIS 300-350 million, and pile its cash reserves high. Granite eked out a small 3.7 percent gain during trading yesterday on turnover of NIS 16.5 million, although the company trades at $177 million.
Granite reported that the deal would reduce its liabilities by NIS 1.8 billion and increase its assets by NIS 1.5 billion. Selling Sonol means Granite loses the asset that created NIS 1.8 billion in revenues in the first half of this year - 90 percent from the Israeli energy sector - and operating profits of NIS 38 million, but net profits were marginal and the company consumes ever-growing credit lines from the banks.
The purchase gives Dor Alon nationwide deployment and a large market share that amounts to a substantial edge in buying gasoline and its byproducts. The deal means Dor Alon will have 360 gas stations and will displace Paz as Israel's largest gas station chain. Dor Alon posted NIS 19.5 million in net profits for the first half of 2005, on sales of NIS 2.5 billion - a 62-percent gain over profits for all of 2004.
The rapid expansion is expected to allow Dor Alon to import gasoline products and compete with state-controlled Oil Refineries. Dor Alon will also gain facilities that will free it from reliance on Pi Glilot for storage services. That dependency has damaged its competitiveness against the three other major players, but it still managed to offer relatively low prices and higher profitability than Sonol or Yitzhak Tshuva-controlled Delek.
Antitrust Commissioner Dror Strum is expected to approve the deal. Apparently, Dor Alon and Sonol contacted him about their intentions weeks ago and received the green light to pursue negotiations. Fuel sector sources believe Strum will order the Dor Alon group to sell 20 Sonol gas stations that are near its own outlets, to preserve competition.
His motive in permitting the deal would be strengthening the competition against Paz, which has a near stranglehold over the gas station market, sources say.
The Sonol acquisition is Dor Alon's opportunity to expand its roadside convenience store business. The first to spot the retail opportunity at gas stations, Dor lost its market leadership this year to ever-present Paz.
Dor Alon operates 157 gas stations, 71 of which have Super Alonit convenience stores. Paz operates branches of its rival chain Yellow at 107 of its 255 gas stations. Sonol, the last to get into the convenience retail market, has just five So Good stores at its 210 gas stations.
The gasoline sector's profitability has been eroded in recent years, and the players are looking to develop roadside retail visions. They discovered they are sitting on prime real estate and that profits from sales of coffee, sandwiches, cigarettes and standard grocery items are much higher than from topping off a tank of gas. Dor Alon is an expert in the roadside convenience sector and the company is a major U.S. franchisee of the 7-Eleven chain.
Wiessman likes retail. Dor Alon recently took over supermarket chain Blue Square Israel from its partner in the chain, Matthew Bronfman. That deal will let Wiessman maximize synergy between his roadside convenience chain and his major foodstuffs retailer, something he had trouble doing while squabbling with Bronfman. Weissman may not even have bid for Clubmarket, but he certainly has no intention of leaving the pole position in foodstuffs retail to Supersol chair Nochi Dankner.
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