Supersol offers NIS 825.5m for Clubmarket
"Blew them all out of the water?" Supersol chair Avraham Bigger's daughter asked him in an 8 A.M. SMS yesterday. Her instinct wasn't wrong.
"Blew them all out of the water?" Supersol chair Avraham Bigger's daughter asked him in an 8 A.M. SMS yesterday. Her instinct wasn't wrong. Supersol, with controlling shareholder Nochi Dankner at the helm, amazed the retail sector yesterday by bidding NIS 825.5 million for collapsing grocery chain Clubmarket (NIS 825,555,555 if you must know). Clubmarket's trustees, Gabi Trabelsi and Shlomo Nass, had published a tender to sell the retailer, which is under bankruptcy protection.
Nass and Trabelsi announced yesterday they would recommend the Tel Aviv District District Court accept the Supersol offer. The bigger retailer would also buy all of Clubmarket's inventory, which the trustees value at NIS 130 million. As part of the offer, the trustees also have the option of allocating up to 4.17 percent of Supersol shares to Clubmarket creditors - worth another NIS 100 million.
The bid would cover a substantial portion of the estimated NIS 1.4 billion Clubmarket debt. The trustees had expected to recoup just 50 percent. The Supersol bid is also NIS 400 million higher than the second highest bid. Supersol also offers a solution for the troubled chain's 3,500 employees, saying it was willing to hire the entire workforce.
Supersol rival Blue Square didn't bid, satisfied with saying it was willing to negotiate. The Elkayam-Sheetrit group put NIS 365 million on the table and its bid structure would have allocated 20 percent of Clubmarket to the banks. The weighted value of that bid was NIS 500 million. The group headed by Rami Levy that included Rekah Pharmaceuticals and the Ilan Rajuan family bid NIS 450 million.
Market players believe that in light of the gap between the offers, Antitrust Commissioner Dror Strum will have no alternative but to approve the deal when it is submitted in court on August 25.
The Clubmarket trustees said yesterday, "This unprecedented sum is far beyond any projections. We believe that for all creditors, the Supersol bid is the best." They added, "This result could not have been achieved without the contributions of the workforce and the suppliers."
Investors cheered Supersol's announcement at the start of trading yesterday, as the share leaped 4 percent. The response was tempered during the day and Supersol closed down 1 percent.
Supersol left no doubt about its plans to become the largest retail chain in the country. The food retail sector was sure the only buyers would be the two major supermarket chains - Supersol and Blue Square - but no one saw Dankner's NIS 825 million cash bid coming.
Bigger and Supersol CEO Effie Rosenhaus declined yesterday to quantify the premium they had offered to ensure their victory.
Costly or not, what is clear is that this deal will change the face of the foodstuff sector, leaving just two players.
Prices are likely to rise. Loss leaders - products selling below cost - which contributed to Clubmarket's demise, will disappear from the shelves. There will probably be less competition, but food retailing will remain pretty ruthless. The private chains that have survived this far won't disappear so quickly and they are likely to gain the support of suppliers interested in nurturing competition against the big boys.
It is also possible that prices will not rise at all, as Supersol expands the aggressive pricing policy it has followed with discount subsidiary Supersol Deal, designed to compete with smaller grocers.
Clubmarket workers did announce a few days ago that they didn't want to see the chain in Supersol's hands, but they probably couldn't have hoped for better. They will keep their jobs in a chain expected to provide a stability they never experienced with Clubmarket.
For the small suppliers, the most important thing is to see Clubmarket's debt back in their bank accounts. The Supersol bid is welcome oxygen for them and will reduce the bankruptcies that so many of them feared. In the long term, those who relied solely on Clubmarket may face problems fitting into the Supersol purchasing policy and some may be left without livelihoods.
Fie, oh trustbuster
Dror Strum found himself in quite a predicament yesterday. This is the man who didn't let Blue Square buy a single branch of Super Haviv at the Yarkonim junction due to fears it would harm competition in the Petah Tikva area. Now he must decide whether to allow the biggest grocery retailer in Israel buy the third-largest player in the same market.
Supersol is paying nearly NIS 1 billion to try to force Strum to swallow the pill.
No one at Blue Square was mourning the missed Clubmarket opportunity yesterday. They weren't in the market to pay that kind of money. Blue Square chair David Weissman told Haaretz, "I would like to congratulate Supersol, Effie Rosenhaus, Avraham Bigger and Nochi Dankner. They made a very generous offer, a life-line for the chain's suppliers and workers."
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