Mega Supermarket Chain Sale Whittled Down to Two Bids

Three groups submitted bids by Friday deadline, but one dropped out on Sunday, citing consortium differences.

Ofer Vaknin

The protracted process of selling the financially troubled Mega supermarket chain has taken two steps forward and one back.

Three offers to buy the food retailer were submitted when the deadline for bids finally closed after four extensions on Friday, but yesterday one of the three said it was already dropping out. On the other hand, another bidder may yet emerge.

Shalom Simhon, a former economy minister, said his group of 10 supermarket chains was rescinding its two-pronged bid of 160 million shekels ($41.3 million) for 90 of Mega’s 127 stores and 66.6 million shekels for the rest.

The latter stores have high-cost leases and are losing money, so the group initially said it would only be willing to buy them if the terms of the leases are renegotiated.

Simhon told TheMarker that in the end he couldn’t get all 10 members of the consortium to agreed to the two-pronged bid.

“Suddenly, when we got to the signing stage, the chains didn’t want to commit on the 37 additional stores, and I couldn’t continue,” he told TheMarker. In addition, he cited strong opposition from the Histadrut labor federation to his group’s bid.

That leaves a second bid submitted Friday by Ilan and Sasi Sheva, who control Bikurey Hasade – Israel’s largest fresh produce wholesaler – and a meat-packing company, Oz Chicken. No details about their offer were available.

A third offer came from Rami Levy, the discount supermarket chain, which submitted its bid early last week to buy all 127 Mega stores for 150 million shekels.

Meanwhile, the Mega trustees are accusing Moti Ben-Moshe – who is buying control of Mega’s parent company, Alon Blue Square – of seeking to undermine the sale by discouraging other bidders and gain control of the supermarket chain for himself without going through the court-ordered sale process.

In a sharply worded letter to his attorney yesterday, trustees Ehud Gindes and Gabi Trabelsi accused Ben-Moshe of stalling on talks to reach an agreement over Mega’s leases for store space owned by Blue Square Real Estate, which is controlled by Alon Blue Square. They said on the one hand he was telling them he wasn’t interested in buying Mega; and on the other, he was telling the media that he was, and then on Friday, after the deadline for bids was over, declared that he is interested in buying Mega as part of a settlement on the leases.

The bids submitted last week were all preliminary and are expected to go higher, closing at somewhere around 250 million shekels. But they all present problems for the court-appointed trustees overseeing the sale.

The offer by Rami Levy is the best for Mega’s 3,500 employees, who would be able to retain their jobs under the terms of the bid.

But the Antitrust Authority has already warned Rami Levy that it will oppose its bid.

Buying Mega would turn the upstart supermarket chain into Israel’s second largest, with annual turnover of 3.8 billion shekels, and reduce competition in the sector, officials fear.

Rami Levy hopes to negotiate an agreement with officials that would involve its selling-off of stores that pose the most serious competition problems.

Bikurey Hasade’s bid will almost certainly be opposed by growers, who have accused the wholesaler of earning big profits at their expense.

It is also likely to run into antitrust resistance because of its powerful position in the wholesale market and network of relationships. Oz Chicken, which is also one of the biggest slaughterhouses in Israel, would also present problems.

Although the trustees yesterday complained about Ben-Moshe’s tactics, they also said they weren’t opposed in principle to him competing to acquire Mega. They added that Ben-Moshe had 24 hours to clarify his position.