Israeli Supermarket Mogul Makes Top Bid for Local Airline, Trustee Says

Israir was controlled by the indebted IDB Group and was put up on the block in a bid to pay off some of its debts

Send in e-mailSend in e-mail
Send in e-mailSend in e-mail
An Israir plane lands in Slovakia, March 2019.
An Israir plane lands in Slovakia, March 2019.Credit: Moni Shapir

Supermarket mogul Rami Levy is close to a deal to buy Israeli airline Israir, in partnership with the brothers and food importers Shalom and Dror Haim.

Israir was controlled until recently by Argentinian businessman Eduardo Elzstain via the indebted IDB Group. Attorney Ophir Naor, the trustee for IDB Development’s assets, put Israir up on the block in a bid to pay off some of IDB’s debts.

On Wednesday, Naor announced that he’d chosen a proposal by BGI, controlled by Levy and the Haim brothers, to buy control of Israir as well as its subsidiaries Sky Deal, Natour and Diesenhaus. In a statement to the court, Naor asked to approve the group’s proposal to buy Israir for 110 million shekels ($33 million). In response, BGI’s share price shot up 15% on Wednesday, while El Al’s dropped 2%.

The proposal includes graduated payments. In addition, 75 million will be paid in cash. Furthermore, IDB’s creditors will receive 20% of BGI’s publicly sold share capital. The buyers also agreed to forgive a $5 million debt by IDB to Israir.

“Israir is a company with assets and great potential, along with risks, with all the implications of this. The responsible thing is to transfer control from a company in liquidation to a solvent company with the means and capacity to control it shares and contribute to its operations,” said Naor.

Naor cited the advantages of BGI’s bid as including the high purchase price, the certainty regarding payment, the upside that would raise value for shareholders, the financial stability of the buyers, Levy and the Haim brothers’ commitment to fund the deal themselves, the regulators’ willingness to approve the deal given that BGI does not have any other business dealings in tourism or aviation, and the guarantees presented to the court. This will maximize the creditors’ value and ensure Israir continues operating during the coronavirus pandemic, Naor stated.

Levy has come a long way since he made a name for himself selling chicken for a shekel at his discount supermarket. Since then, he has established himself among Israel’s tycoons, and is sitting on significant cash thanks to his profitable discount stores. He maintains close ties with the Likud Central Committee and speaks directly with Prime Minister Benjamin Netanyahu.

Levy currently holds 40% of the supermarket chain he founded, Rami Levy Shivuk Hashikma, and his shares are worth some 1.2 billion shekels ($365 million). The chain has 52 branches with annual turnover of 6 billion shekels. Levy expanded into the cellular sector in 2010, launching Rami Levy Communications, which now has 260,000 customers. He also controls 40% of Hashikma International Communications and 50% of pharmaceutical chain Good Pharm, which has 24 outlets.

The company that Levy is seeking to buy, Israir, is a stock exchange shell company. This will enable Israir to be publicly traded through a back door, and will make it Israel’s second publicly-traded airline, along with El Al.

Rami Levy, poses for a photograph alongside shelves of tinned food inside a Rami Levy Supermarket in Jerusalem, November 23, 2014. Credit: Bloomberg

Levy and his partners beat out a line of prospective buyers, including Dor Alon and Global Knafayim.

“We’re pleased by the faith placed in us and that our offer was chosen, and we’re waiting for the court’s final approval,” said BGI Chairman Moti Hazan.

Despite Naor’s recommendation, it’s not clear that the deal is done.

Levy’s interest in Israir stems from the synergy between the airline and his other businesses. His businesses have partnered with Israir on marketing campaigns, including pushing the airline’s routes to Baku, Azerbaijan and Tirana, Albania. The companies both focus on low price points and have small, pared down headquarters.

Israir, led by Uri Sirkis, has gotten through the coronavirus crisis relatively well. While the company was forced to shut operations along with other airlines, it sustained relatively little damage compared to its competitors. The company managed to turn an operating profit (EBITDA) in the third quarter, compared to a loss of $4.5 million in the second quarter.

Comments