Court Affirms Sale of Mega Supermarkets to Yenot Bitan

Improved last minute bid by Rami Levy ignored by Judge Ilan Shilo, but antitrust issues lie ahead.

Ofer Vaknin

A judge Monday approved the sale of the bankrupt supermarket chain Mega to Yenot Bitan, ignoring Rami Levy’s offer to raise his bid a second time.

The sale still requires approvals from the Antitrust Authority and from Mega’s creditors, but if it passes those hurdles it will vault Yenot Bitan into the No. 2 spot among food retailers after long-time market leader Super-Sol, with more than 200 stores.

Rami Levy sought to block the sale by arriving at Lod District Court with an offer of 359 million shekels ($94 million), not including inventory, for Mega’s approximately 120 stores. It was the second time Rami Levy had raised its bid and made it over 84 million more than Yenot Bitan’s.

But Judge Ilan Shilo failed to relate to the improved offer at all during a dramatic day of courtroom proceedings, agreeing with the trustees overseeing Mega’s sale that they didn’t want to re-open the bidding process. The trustees last week recommended the sale of Mega to Yenot Bitan after receiving six offers.

Rami Levy’s attorney said the discount supermarket chain planned to appeal Shilo’s decision. “We believe the decision was faulty and defies the basic rules set by the High Court of Justice, which say that creditors must accept or reject a debt arrangement and as part of that process given all the relevant options,” attorney Raanan Klir said.

Closely held Yenot Bitan, which won last week’s auction for Mega with a minimum bid of 405 million shekels (including inventory), has 80 stores with a combined annual turnover that has been estimated to be as much as 3.5 billion shekels. Mega has 126 stores with combined sales of 2.5 billion shekels. At 206 branches after the proposed purchase, Yenot Bitan’s store count would still fall short of Super-Sol’s 277.

Andrey Nickel, a representative for the Antitrust Authority, told the court Monday that the competition issues surrounding Yenot Bitan’s acquisition were complicated and that it would need about six weeks to fully examine it. Shilo told Nickel to report back to the court in 15 days with a preliminary opinion.

Meanwhile, he ordered Mega’s creditors to meet in the next 10 days to approve the sale or not. Mega’s trustees estimated that the proceeds from the sale to Yenot Bitain would enable the first-line creditors to get back 100% of what they are owed while second-line creditors would get anywhere from 36% to 80%.

Rami Levy wasn’t the only bidder to oppose the sale. Moti Ben-Moshe, the Israeli-German entrepreneur who is in line to acquire Mega’s parent company, Alon Blue Square and also made a bid for Mega itself, appeared in court as did Hagi Shalom, who controls the Tiv Taam supermarket chain. They accused the trustees of not undertaking a transparent bidding process and preventing him from raising his bid.

“At the beginning Tiv Taam wasn’t in the game. Tiv Taam didn’t approach the trustees – it was the other way around. The trustees asked us to enter into negotiations. After negotiating and an exchange of drafts, the trustee didn’t recommend to Tiv Taam that it raise its bid a certain amount,” said attorney Evitar Knoller, who was representing the grocery chain.

The trustees responded that Yenot Bitan’s bid was still the best and most promising and dismissed the other bids as opportunistic. “The company [Mega] is the hottest item in town,” said attorney Ehud Gindes. He noted that Yenot Bitan had won over labor unions and had signed an accord with the Histadrut labor federation earlier in the week.