Apax Seen Likely to Cut Tnuva’s Price 7%

Chinese buyer Bright Food demands reduction in valuation of Israeli food manufacturer after weak second-quarter results.

David Bachar

Apax Partners is expected to reduce by about 7% the valuation at which it agreed to sell Tnuva Food Industries to China’s Bright Food, sources close to the deal said on Sunday.

Apax Israel CEO Zehava Cohen returned last week from meetings with Bright Food executives who exerted considerable pressure on her to lower the valuation of the Israeli food giant. Under the agreement the Chinese state-owned company signed in May, Tnuva was valued at 8.6 billion shekels ($2.5 billion).

Sources said Apax may ultimately settle for an 8-billion-shekel valuation for Tnuva, which reported weaker profits in the second quarter and a 3.8% drop in sales amid a toughening regulatory environment for the food industry.

Bright Food has also complained that Tnuva paid a 400-million-shekel dividend at the end of July and noted the decline in Tnuva’s sales during Operation Protective Edge in July and August.

Bright Food agreed to buy Apax’s 73% stake in the company that controls Tnuva four months ago, subject to adjustments before the deal was schedule to close August 22. But the two sides had to extend the deadline by 45 days to October 5 as Bright Food awaited regulatory approvals.

If they don’t come by that deadline, each side will have the right to ask another extension till January 5, 2015.

Bright Food may also be taking advantage of the fact that Apax is exempt from paying taxes on the profits it will be earning from Tnuva, an amount that could reach $1 billion. Under the circumstances Apax may be more willing than usual to lower the valuation and ensure the sale goes through.