Management and workers at the troubled Mega supermarket chain have come to an agreement that will see 32 of the food retailer’s branches close and up to 1,000 positions eliminated. The agreement is designed to stave off collapse of the chain and will also give Mega employees a one-third stake in their employer.
The agreement, which was ironed out Sunday morning, also calls for an injection of 220 million shekels ($57 million) on the part of Mega’s owner, Alon Blue Square Israel, and 35 million shekels in salary and benefit concessions on the part of staff. The agreement calls for longer credit payment terms and will free it of onerous wage obligations. The workers’ committee, it was agreed, will also be getting two seats on the company board and on the committees dealing with the recovery plan, with voting rights.
The agreement provides that one of the two worker representatives on the board and the committees implementing the plan will be a professional. Yaron Zelekha, the dean of the business college at Ono Academic College and a former accountant general at the Finance Ministry, will be the professional representative on the company board and the recovery committees. He is to be appointed vice chairman of the board as well, and will have certain veto powers.
“The days are over when shareholders drew money from Mega as they pleased,” Zelekha told TheMarker. In fact, no dividends or bonuses are to be paid during the recovery period.
The agreement was announced at the Tel Aviv headquarters of the Histadrut labor federation, where Mega chairman Avigdor Kaplan said all of the chain’s debts would be paid in full. For his part, Histadrut chairman Avi Nissenkorn told the news conference that the plan will stabilize Mega and pave the way for its future success. However, he acknowledged more difficulties to come. “There are 6,000 employees at Mega, and the agreement leaves stable workplaces for more than 5,000 families,” he said. He added that 350 permanent employees and hundreds of temporary workers with less than three years on the job will be leaving.
In addition, about 200 employees at branches slated to be closed will be transferred to other Mega stores, Nissenkorn said. The exact numbers, however, are not clear and include not only those who will be forced to leave but also employees who leave of their own accord.
Of the approximately 190 branches that Mega maintains under three brand names, the locations to be closed include not only Mega-brand stores and the chain’s discount You stores but also Mega’s Zol Beshefa stores, which caters to the ultra-Orthodox community. It is expected that 18 You stores – about half of all You locations – will be shuttered. Only a small number of Zol Beshefa stores and about 10 Mega locations are expected to be on the list of locations to be closed.
Kaplan called the recovery plan a creative agreement in which Mega employees become partners in bearing the current burden, but also in future profits. The plan, he said, is centered around boosting sales and bringing back customers who have abandoned the chain.
Zelekha called it a “day of celebration” for organized labor. “The days are over in which the employees take upon themselves the recovery of a company while owners and management benefit from the profits. The workers are going as far as they can for the company’s recovery, but are insisting that the controlling shareholders inject substantial sums for its recovery.”
Mega’s CEO, Raviv Brookmayer, said the retailer would concentrate on its regular-priced Mega Ba’ir stores rather than its discount locations, and added that, at this point, the challenge in part is to get suppliers on board with the recovery plan. “It wasn’t easy to let a quantity of stores and sales volume go, but we understood that if we only applied a Band-Aid, we would again be facing this situation in a few months,” he added.