Steimatzky may have no choice but to ask the court for protection from its creditors after the two most likely buyers have dropped out of the bidding, the bookstore chain’s CEO told employees on Tuesday.
- Markstone’s Israeli investors refusing to put up more cash
- Israeli bookstore chain Steimatzky sold to investor group headed by Gimel Yafit
Yedioth Aharonoth Books will not be allowed to buy the troubled book store chain for antitrust reasons, The Marker has learned, while negotiation with the parent company Keter Publishing and the Kravitz office supply chain has collapsed, Keter and Kravitz announced on Tuesday.
The chances that Steimatzky will soon have to ask the court for protection from its creditors is becoming very likely, as negotiations are now continuing with only one serious purchaser, Yafit Greenberg’s G. Yafit group, an advertising and marketing company.
Steimatzky CEO Iris Barel gathered her headquarters staff on Tuesday to tell them the news, but she said she remained optimistic. She said negotiations were continuing with four possible buyers, although two of them dropped out after she spoke.
Antitrust Commissioner David Gilo has expressed his grave doubts about Yedioth Books buying Steimatzky in a joint bid with the games maker Yetzira. The sale to a major book publisher and potential competitor would have serious antitrust implications, said sources close to Gilo.
The offer from Alderan, the group that controls Keter, and Kravitz was turned down by Steimatzky because there were better bids, said a source close to Steimatzky. Kravitz and Keter claimed they were the ones that notified Steimatzky they were no longer interested, sending a letter Tuesday morning to Barel and Ron Lubash, the head of the Markstone private equity fund that owns Steimatzky, informing them the deal was off.
After conducting due diligence on Steimatzky, it seems Keter and Kravitz realized that the chain is headed to bankruptcy court in any case, therefore it was better to wait than to pay what they now consider an exorbitant price.
“There are debts to suppliers of some 70 million shekels ($20.3 million) and more debts of another 20 million shekels to employees. No one will pay 100 million shekels for a company like that, which doesn’t have assets approaching that value. At most, they might pay 20 million shekels for Steimatzky including inventory,” said a senior executive in the publishing industry who had been courted as a possible buyer of Steimatzky.
The price discussed in early negotiations with Keter was in the range of 30 million to 40 million shekels, although Keter later clarified that at that price it would not assume the book retailer’s debt and that it only wanted to buy its operations, not the company itself.
“Steimatzky is finished and Barel decided with great chutzpah to take a 650,000-shekel bonus while the company is in horrible shape. There is a limit to what the court will say when it reaches a stay of proceedings,” said the publishing industry executive, referring to the bonus Barel received for her performance in 2013.
Markstone said on Tuesday that in preparation for selling Steimatzky it was assuming the chain’s debts to Deutsche Bank as well as the money Steimatzky owes the Magnolia jewelry store chain, which is also owned by Markstone. Together the debts amount to tens of millions of shekels. Markstone intends to pay these debts off with the money it is expected to receive from its American investors in a $80 million capital call it has made (see story below) and is trying to sell Magnolia.
The petition to the court for protection from creditors for Steimatzky was prepared by its attorney as early as April as the chain has had problems paying suppliers for months arousing fears that one of them would ask a court to liquidate the company. Major publishers have stopped supplying Steimatzky with new books since they have not been paid for books supplied months ago.