Steimatzky to Have New Owners Within Two Weeks

Troubled private equity fund Markstone is selling Israel’s biggest bookstore in halves.

Daniel Tchetchik

The sale of Steimatzky, Israel’s biggest book retailer, to Ardelan Investments and the Kravitz stationery and office supply chain for about 50 million shekels ($14.3 million) is expected to be completed within about two weeks.

Arledan and Kravitz were due to complete the due diligence process several days ago, but got extra time to complete the acquisition to secure the approval of Antitrust Commissioner David Gilo. Arledan controls the book publisher Keter, while Steimatzky controls about 38% of the book-retail market in Israel. Nevertheless, Arledan CEO Tzali Reshef said he expects the sale to be wrapped up soon.

Arledan and Kravitz, which will each acquire 50% of Steimatzky from the financially troubled private equity fund Markstone Capital Group, will not assume most of the bookstores’ debt, which includes a loan from Deutsche Bank, a source close to the negotiations told TheMarker.

“No skeletons were discovered in the due diligence that cannot be overcome,” the source said. “We just hope that Markstone will not be hurt in the transaction.”

To conduct his investigation, Gilo, the antitrust commissioner, has asked publishers and book retailers to provide his office with information on the book market and Steimatzky’s operations by the end of the month. One publisher said information that Gilo is seeking includes sales volumes by retail chain, the type of sales, book distribution practices and discounts provided.

The proposed sale to Arledan and Kravitz came after cash flow problems at Steimatzky became so severe in April that it could not pay money owed suppliers. The suppliers were ultimately paid, but a week late, after Bank Hapoalim struck an agreement with Markstone to provide the chain about 4 million shekels in additional credit, contingent on Markstone’s injecting another 8 million shekels ($2.3 million) into the chain. That has given Steinmatzky breathing space of a few months until the sale is consummated.