Yossi Sagol, whose family controls Keter Plastics, and Eran Meital, a former Delek Real Estate CEO, are in advanced talks to buy the ailing food retailer Mega.
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The two have met several times with Avigdor Kaplan, the CEO of Mega’s parent company, Alon Blue Square, and are now valuing the business, which comprises 114 Mega in the City supermarkets and 12 Zol B’Shefa stores aimed at ultra-Orthodox shoppers.
Sources close to Sagol said he is representing a group of American investors he has come to know socially and professionally. The brother of Keter CEO Sami Sagol, Yossi Sagol has for four years been president of the company’s North American unit, which accounts for about a third of total sales.
The sources, who asked not to be identified, said the agreement that is shaping up in negotiations sees the Sagol-Meital group injecting between 250 million shekels and 300 million shekels ($64.3 million to $77.1 million) into Mega Retail in exchange for the 66% stake now controlled by Alon Blue Square.
Sagol and Meital were unavailable for comment. Mega confirmed that it has received offers to invest in the company, but declined to elaborate. Shares of Alon Blue Square ended down 1.1%, at 1.71 shekels, on the Tel Aviv Stock Exchange on Sunday.
Once Israel’s second-biggest supermarket chain, Mega has been crushed by competition from upstart discount retailers and its rigid cost structure. The chain has sold and shuttered its You sub-brand of discount supermarkets and now is left with the Mega in the City format of high-priced neighborhood supermarkets and the Zol V’Shefa chain.
Mega Retail owes some 900 million shekels, two-thirds of that to suppliers. Last summer it won some debt relief and consent by labor unions to wage and job cuts in a deal that left unions controlling 33% of the company.
Keter, a maker of plastic products for the consumer market, posts about $1 billion in sales annually and has made the family one of Israel’s wealthiest, with an estimated net worth exceeding 1 billion shekels.
Even though Kaplan has said that Alon Blue Square’s controlling shareholders have said they want to keep what remains of Mega, the company has in fact conducted talks with at least two other prospective buyers. A group led by Yafit Greenberg, a television pitchwoman who controls the Steimatzky bookstore chain, is exploring an offer as are brothers Zwi and Joseph Williger, who used to control food importer Willi-Food.
If an agreement is reached on selling Mega to the Sagol-Meital group, it will be the first significant investment by Yossi Sagol, 37, and his first foray outside the family business. He would be bringing what sources said is considerable managerial, marketing, retail and finance experience to Mega.
Much of that experience was acquired in executive positions at major American retailers such as Sears and Kmart. The sources, who were speaking on condition of anonymity, said Sagol would remain at Keter and would not be involved full-time in Mega.
Even as negotiations with prospective buyers go on, Mega is struggling to keep its shelves stocked. Many importers and manufacturers are refusing to deliver goods or delivering smaller quantities than usual in order to limit their exposure in the event the retailer can’t pay suppliers.
Without popular brands including Wissotzky Tea and certain cigarettes, Mega has had trouble retaining customers. Its weekly sales turnover has shrunk to 55 million shekels, compared to 80 million shekels before it turned to the courts for protection from creditors in July.