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Last Thursday, after a week of intense talks and drafting and redrafting documents, the sale was on. Trustee managers of Clubmarket put the entire 114-store supermarket chain on the market, hoping that a white knight would rescue the company from imminent collapse. Clubmarket filed for protection from its creditors earlier this month after accruing debts of some NIS 1.4 billion to its suppliers and bankers.

The managers, CPA Gabi Trabelsi and attorney Shlomo Nass, noted that they would prefer a single buyer for the whole lot, while Antitrust Commissioner Dror Strum said he preferred a buyer that was not in the local retail market (that means, not Supersol or Blue Square, both of which are apparently interested in bidding, possibly jointly).

Clubmarket was bought by the Borovich-Mozes-Rosen group in 2001 for $93 million. At the end of 2002, the Giza consultancy firm put a price tag on the chain of $145-180 million. Today, the troubled chain is worth practically nothing because of its debts. However an arrangement with its creditors would give the chain some value, and the chain could be worth $30-100 million.

Clubmarket is the third largest food retailer in the country (see chart below) and had sales of some NIS 3 billion last year. Supersol had revenues of around NIS 6 billion and Blue Square had NIS 5 billion in 2004. Both these have 170 stores apiece.

The belief is that if Clubmarket were spruced up, with loss-making stores sold off, it could command earnings of 1.5-2 percent on a yearly turnover of NIS 2 billion. On an optimistic view, the chain could make profits of NIS 60 million.

This was the calculation of the court-appointed managers, assessing that such a scenario would make Clubmarket worth some NIS 500 million. If they could sell it for that sum, it would clear almost half the company's debts. However, a buyer would be required to inject further monies into the chain, so the final sale price may not be so high.

For an initial price of NIS 15,000, a potential buyer is allowed into the information room, where he or she would be able to review confidential corporate information of the chain: is the buyer exempt from existing collective work agreements; is the buyer exempt from rental contracts; are any stores about to be closed before the sale.

Other than debts of NIS 1.4 billion, the chain has other problems. It reported losses of NIS 101 million in 2004 and half of its branches are in the north with only 38 percent in the center and 6 percent in the south. Analysts believe that its spread over the country and a slight presence in the the more affluent parts of the country are part of its downfall. To compare, Supersol and Blue Square have 67 percent and 76 percent, respectively, of their stores in the better-off central regions.

According to estimates, Clubmarket also numbers some 40 branches that are not profitable, and haven't been so for years. When the chain was bought out by the Borovich-Mozes families and Yossi Rosen, some of these loss-making stores were converted to the Hetzi Kupah brand (Clubmarket's cut-price subsidiary) but, despite a slight recovery in 2002, 2003, most of these returned to making losses in the past year.

Most of Clubmarket's stores have not had a face-lift for years, the company's information systems are similarly behind the times and the chain does not operate a member's club as is the sector norm. Its inventory system does not match up to the latest standards either, all of which suggest that a potential buyer has to invest heavily to see his money back.