The Phoenix insurance company signed an agreement Monday with Yeinot Bitan to buy control of the grocery store chain. Phoenix and a group of investors will inject 400 million shekels ($118.75 million) into Yeinot Bitan in exchange for 45% of the company’s shares. The deal values Yeinot Bitan at a market cap of 900 million shekels before the money.
Yeinot Bitan is one of Israel’s four major grocery store chains, with 140 stores and annual turnover of 3.5-4 billion shekels.
The low valuation reflects the grocery chain’s fragile financial state, its lack of profitability and the need for heavy investment in order to improve its status vis-a-vis suppliers.
Phoenix is expected to prepare Yeinot Bitan for an initial public offering in late 2021 or early 2022.
After the deal, Phoenix will hold 20% of Yeinot Bitan’s shares, the maximum that a financial company is allowed to hold in a nonfinancial company under Israeli law. The remainder will be held by the Clearmark Fund, Arkin Investments and Barak Capital Underwriting.
Phoenix will appoint most of the company’s board members, pushing aside the founder and former controlling shareholder Nahum Bitan, who will be left with a 40% stake in the company. The deal was conditioned on the current board chairman and CEO staying, and it’s likely they’ll be compensated for it.
Yeinot Bitan’s bank lenders, Hapoalim and Mizrahi Tefahot, will receive 5% of the chain’s shares.
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The deal is conditioned on due diligence checks.
Bitan, founded in 1995 by Nahum and Nurit Bitan with a single store in Ashkelon, is losing control of the company due to a 450 million shekel debt to Mizrahi Tefahot and another 100 million shekel debt to the trustees of the Mega supermarket chain, which was in bankruptcy when Bitan bought it for 450 million shekels in July 2016.
Yeinot Bitan has lost money for the past three years. It was forced to sell off 16 of its branches for 232 million shekels, including stores in very good locations.