Food retailer Yenot Bitan looked as if it had secured the backing of creditors to buy the bankrupt supermarket chain Mega on Thursday after it raised its offering price and won support of the biggest of them.
The results of the meeting, which took place at Mega’s logistics center at Kibbutz Eyal, won’t be released until early next week, but TheMarker has learned that Bank Hapoalim, Mizrahi Tefahot Bank and the Israeli Credit Insurance Company, which together hold nearly half of Mega’s 1.2 billion shekels ($310 million) of debt, voted in favor of the Yenot Bitan bid.
Yenot Bitan – a medium-sized supermarket chain that would grow in one fell swoop to Israel’s second largest if it buys Mega – cemented its support among Mega creditors by raising its offering prices just 20 minutes before the meeting began Thursday.
Yenot Bitan said it would pay 455 million shekels for Mega, 50 million more than it had offered in a court-ordered auction earlier this month that won the approval of Mega’s trustees and Judge Ilan Shilo of Central District Court, who is administering the process.
In addition, Yenot Bitan sought to assuage creditors’ concerns about its ability to repay Mega’s debt by committing itself to turning over 20% of Mega’s operating profits over the next four years to creditors up to a ceiling of 100 million shekels and no less than 50 million.
Yeterday, Yenot Bitan said it would finance the Mega acquisition by selling assets valued at up to 120 million shekels. Another 50 million will come from bank loans that have already been lined up and most of the rest from cash flow, it said.
Still, many creditors at the meeting were critical of the process that they say gave them nothing more than a yes or no vote on accepting Yenot Bitan’s offer.
At least two of the losing bidders – the discount grocer Rami Levy and Moti Ben-Moshe, who is buying Alon Blue Square, Mega’s parent company, sought to have their offers shown to creditors but on Wednesday were turned down by Shilo. Rami Levy is reportedly considering an appeal to the Supreme Court, although Ben-Moshe lost one he made earlier this week.
“We can’t get away from the feeling that the trustees aren’t representing the creditors,” Yaron Angel of the family-owned Angel Bakery, told the trustees to the applause of creditors. “You see that every other day someone comes and raises his bid, but you nevertheless insist that the company [Mega] will be sold for a lower price.”
One of the trustees, Amir Bartov, responded that they had no preference for one bid over the other and that the bid by Rami Levy was problematic because of the antitrust obstacles it was likely to encounter.
The yes votes by Hapoalim (which is owed 290 million shekels), Mizrahi Tefahot (150 million) and Israel Credit Insurance (151 million) alone bring Yenot Bitan close to the minimum it needs to clear the creditors’ hurdle. Rules require it to win at least 75% of the votes weighted by the size of debt owed to each voter and 50% of the vote equally weighted.
Buying Mega would vault Yenot Bitan into the No. 2 place among Israeli supermarket chains after Super-Sol. In documents shown creditors Thursday, Yenot Bitan said it had 71 stores, generating revenues of 2.8 billion shekels and accounting for 6.1% of all grocery sales nationwide.
Assuming the Antitrust Authority countenances the acquisition and doesn’t condition it on Yenot Bitan divesting some of Mega’s stores, it would be adding about 125 more outlets to its business, pushing Rami Levy into the No. 3 spot.
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