Will the British Buy Love From the Dead Sea?

In the past year, London has become an attractive destination for Israeli companies, mainly in the real estate sector, which has raised hundreds of millions dollars. Now more industrial enterprises are eyeing London as a suitable arena, in which to raise funds and become publicly traded companies.

TheMarker has learned that Ahava Dead Sea Laboratories cosmetics company is considering an initial public offering (IPO) on London's Alternative Investments Market (AIM) exchange. Ahava, the Hebrew word for love, is still in the initial stages of the IPO process, but plans to go public before the end of this year. Ahava's shareholders include Kibbutz Mitzpe Shalem, located north of Ein Gedi near the Dead Sea (41 percent), Hamashbir Holdings, owned by the Livnat family, and Gaon Holdings, controlled by Benny Gaon (41 percent) and Ein Gedi and Kalia kibbutzim (18 percent).

Ahava was founded in 1988 and develops, manufactures and markets cosmetics products based on Dead Sea mud and minerals. Three and a half years ago, Hamashbir almost sold its Ahava holdings to a group of American investors at a value of $21 million, but the deal did not go through. Ahava's planned IPO will presumably be at a much higher value.

Aiming for AIM

Ahava is a profitable company, most of whose revenues come from exports. It therefore makes sense for the company to issue shares abroad. Ahava has 200 employees, 180 of whom work in Israel, either at the company's plant near the Dead Sea, or at the administrative and marketing offices in Holon. Company CEO Yakov Ellis is spearheading the IPO process, along with Gaon Holdings CEO Shai Preminger.

If the IPO succeeds, Ahava will be the second kibbutz company to be traded on the AIM, following the floating of Amiad Filtration Systems, of Kibbutz Amiad, in December 2005. Gaon Holdings was the driving force behind that IPO, too, as Gaon owns shares in Amiad (through subsidiary Gaon Agro). A few months after the IPO, Goan sold its Amiad holdings for NIS 42 million.

Proving growth and profits

In the past year, the window of opportunity for Israeli companies to offers shares in London has narrowed considerably. The market has become crowded and British investors have become choosier. The negative yields posted by most of the Israeli companies traded on the AIM also do not improve the reputations of Israeli representatives. In order to succeed, Ahava will have to present quality management and a record of growth and profitability in order to convince British investors that it has a promising future. Ahava declined to comment for this article.