From Israel With Ahava

Will the British buy cosmetics made with Dead Sea mud?

London has become quite the venue for Israeli real estate companies, some of which raised hundreds of millions of dollars. Companies from other sectors are hoping to receive a warm welcome in the chilly island too.

One such is the Ahava cosmetics company. It's just started examining its possibilities, but it's thinking of offering itself to the U.K. public by year-end, on the AIM market.

Ahava is owned by Kibbutz Mitzpe Shalem (41%), Hamashbir Holdings (which is owned by Benny Gaon's Gaon Holdings and the Livnat family, 41%), and the kibbutz Kalya and Ein Gedi (18%).

Founded in 1988, Ahava develops, produces and markets cosmetics based on the Dead Sea mud and minerals. Its products are not tested on animals.

Three and a half years ago Hamashbir Holdings was about to sell its holdings in Ahava to a group of American investors Tadiran a company value of $21 million, but the deal never came off. Presumably it's aiming for a higher valuation now.

If the AIM offering comes off, Ahava would be the second kibbutz company on the AIM. In December 2005, Amiad Filtering Systems, owned by Kibbutz Amiad, hit the London market. There too one of its shareholders was Gaon Holdings, via Gaon Agro. A few months after Amiad's IPO, Gaon Agro sold its holdings in the company for NIS 42 million.

Ahava is profitable. Most of its income derives from export, hence the logic of floating its stock outside Israel. The company has 200 employees, of whom 180 work in Israel. Its production is at the Dead Sea and the management is in Holon.

In the last year, however, the window of opportunity for Israeli companies to float in London has been swinging shut. British investors are turning pickier, and the fact that a lot of the Israeli companies listed on the AIM are losing money hasn't done the reputation of the Israeli pack much good. Ahava must show that it has a record of good management and profits, not just a pretty face.