China’s Bright Food Group got a tepid welcome in Israel Thursday, a day after it agreed to buy a controlling stake in Israel’s biggest food maker, Tnuva, in a deal valuing the company at $2.5 billion.
State-owned Bright Food said it had agreed in principle to buy 56% of Tnuva from the British private equity fund manager Apax. Bright Food did not disclose the sum, but Israel’s Mivtach Shamir Holdings – another major shareholder in Tnuva – said the deal valued the dairy company at 8.6 billion shekels ($2.5 billion).
MK Shelly Yacimovich (Labor) asked Attorney General Yehuda Weinstein to urgently investigate whether the sale required special approval. Tnuva’s workers’ committee welcomed the sale – on condition that its employees receive a bonus.
On Facebook and other social media websites, many protested the deal, which will put in foreign hands the cottage cheese so popular among Israelis that a 2011 price hike sparked months of protests.
“I won’t buy Tnuva anymore” and “A Zionist enterprise was sold to the highest bidder” were among the reactions, although others were more supportive and asked why people were upset when Tnuva had been controlled by British investors since 2008.
Although Tnuva is best known for its dairy products, the deal is more about giving the Chinese firm access to new cheese products and technological know-how in dairy production, trade sources and analysts said. Bright Food’s rivals have overtaken it in China’s fast-growing cheese and dairy markets.
The Chinese cheese market will be worth 2.7 billion yuan ($433.13 million) this year, doubling to 5.3 billion yuan by 2018, according to consultancy firm Euromonitor. Last year Tnuva had a revenue of 7.17 billion shekels from the sale of a range of cheeses, as well as milk, yogurt, meat and eggs.
“Israel is a country with highly developed agriculture and animal husbandry techniques. Tnuva, as Israel’s largest food company, has a long history and various products and large market share,” a Bright Food spokesman said, in a text message to Reuters.
The Tnuva sale comes as China is taking a growing interest in Israel, with scores of Chinese investors and business executives in Tel Aviv this week for a high-tech conference, and a Chinese-led group seeking to buy Clal Insurance, one of the country’s biggest insurers.
Even before the Tnuva sale was announced, lawmakers were calling for Chinese acquisitions to be reined in. In March, MK Avishay Braverman (Labor) submitted legislation that would require special approval to sell “strategic” companies to foreigners.
Yacimovich said Thursday that “no normal country puts its food security and entire dairy industry in the hands of China or any other foreign power. We’re seeing a different and depressing example of the opposite of investing in Israel – of sucking out, of exploitation and control.”
She called for Tnuva shares to be floated on the Tel Aviv Stock Exchange instead, a move Apax was considering if the sale to Bright Food fell through.
Nevertheless, Prime Minister Benjamin Netanyahu and other policy makers have recently been encouraging more Chinese investment in the country as a way of enhancing ties with an up-and-coming world power. Treasury officials told TheMarker this week they wouldn’t veto Chinese acquisitions.
Mivtach said Thursday it was holding talks with Bright Food to sell its 21% stake in Tnuva. Mivtach has a “tag-along” option, giving it the right to sell its stake together with the Apax sale. Mivtach shares fell 3.5% to close at 122.70 shekels in TASE trading.
A group of kibbutzim own the rest of Tnuva. Bright Food said it would look to strengthen cooperation with smaller shareholders, rather than buying them out.
Meanwhile, Tnuva’s workers committee said it had started talks over the size of the potential bonus the company’s 5,500 staff will get when the sale is completed. Its chairman, Ahiav Simhi, warned that it would impose a slowdown if the sides failed to reach agreement.
“When Tnuva was sold to Apax, every employee got a bonus of five [monthly] salaries,” he said. “This time we’re demanding a far bigger bonus, because the deal with Bright Food is larger.”
Nevertheless, Simhi said he supported the sale. “There’s big potential here for Tnuva’s growth. I can’t see a scenario where workers would be worse off. Anyhow, the workers’ committee knows how to defend worker rights.”
Want to enjoy 'Zen' reading - with no ads and just the article? Subscribe todaySubscribe now