Buyers Offer to Buy Steimatzky Operations Without Taking on Debt

We don’t want creditors taking a 'haircut,' says Ardelan CEO.

Daniel Tchetchik

The sale of the Steimatzky book store chain is still not a done deal, as the two sides spar over the price and other terms.

After conducting due diligence of Steimatzky’s books, the Kravitz office supplies chain and Ardelan Investments are now interested in buying only the book store chain’s operations and not the company itself, TheMarker has learned. Moreover, TheMarker has learned that the Markstone Capital Group private equity fund wants more than the 50 million shekels ($14.3 million) that Kravitz and Ardelan, the parent company of Keter Publishing, are prepared to pay.

If they were to buy only the retailer’s operations, it would mean that the two would not take on any of Steimatzky’s debts to suppliers, employees and other creditors. It would also mean the proceeds of the sale would go to Steimatzky — not to Markstone.

“We are conducting negotiations to buy the operations, so the past debts to suppliers will be Steimtazky’s problem alone,” Arledan CEO Tzali Reshef told TheMarker, but signalled he did not want creditors taking a haircut. “Keter is one of the two largest suppliers of Steimatzky, so we have no interest in [Steimatzky’s] reducing the debt to suppliers.”

Markstone said a month ago that it was conducting negotiations to sell the book retailer to Ardelan, with Kravitz signing on as a co-purchaser a day later in a 50-50 partnership. The sides agreed to a 30-day due diligence process, during which Markstone Chairman Ron Lubash agreed not to enter into any other negotiations to sell Steimatzky. The 30 days ended over a week ago, but Aredelan and Kravitz were given extra time to receive antitrust approval.

Keter is one of the three largest book publishers in Israel and Steimatzky’s 130 outlets control about 38% of the retail book market in Israel, which means the sale requires Antitrust Commissioner David Gilo’s consent, which he has yet to give.

Kravitz has 75 stores in Israel and owns Akademon, a university book store chain. Late last year, Kravitz began selling books, after Steimatzky began selling office supplies. The thinking in the industry is that the bookstores will expand their offerings to also include toys.

Markstone began looking for a buyer after cash flow problems at Steimatzky became so severe in April that it could not pay suppliers. The suppliers were ultimately paid, but a week late, after Bank Hapoalim struck an agreement with Markstone to provide the chain with about 4 million shekels in additional credit, contingent on Markstone’s injecting another 8 million shekels into the chain to given Steimatzky breathing space until the sale is consummated.

Steimatzky declined to comment.