Sami Sagol hopes to see sales of Keter, the family-owned maker of plastic products he agreed to sell last week, reach a level that would value it at more than 2 billion euros ($2.2 billion at current exchange rates) by tapping into new markets like the Far East and Eastern Europe.
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The private equity fund BC Partners won exclusive rights last week to make a final bid for Keter with an offer to buy 80% of the company for 1.36 billion euros, beating out a counter-offer by CVC and Goldman Sachs. The prospective deal values the company at 1.7 billion euros.
That was less than what Sagol had hoped to fetch when he put the company on the block two years ago, but sources said that the reported valuation he fetched was, in fact, quite high. Similar, publicly traded companies are valued at seven to eight times their shareholders equity, which would have put Keter’s valuation at no more than 865 million euros.
Media reports, however, said the competition between BC Partners and CVC-Goldman Sachs, as well as others who dropped out, led to offers valuing it at between 1 billion and 1.36 billion shekels.
Sources close to Sagol told TheMarker that he believed BC Partners, which has spent 100 million euros buying 91 companies since it was formed in 1986, can help the company penetrate new markets and boost Keter’s valuation to his original goal.
Sami Sagol and his brother, Yitzhak, who each own half of the company, will retain the remaining 20%, enabling them to share in any increases in value Keter enjoys under its new owners.
As a closely held company, Keter is not required to release its financial results publicly. According to one source, however, the company reached about 638 million euros last year, with earnings before interest, depreciation and amortization, or Ebitda, about 109 million euros. Other sources put sales at 800 million euros and Ebita at 136 million.
Although terms will only be finalized in negotiations the two sides are expected to wind up talks within two weeks, sources said. The Sagols will probably have an option to sell their 20% share later when BC Partners is expected to float Keter shares on an overseas stock market.
Keter is an iconic Israeli company whose flagship product is the ubiquitous white stackable plastic chair found in homes, schools and institutions all over Israel. It also makes a huge range of other plastic products ranging from garden sheds to trays and toolboxes.
Although its projected price tag is much lower than the Wertheim family’s $6 billion sale of Iscar to American investor Warren Buffett, the sale of Keter will be one of the biggest ever of an Israeli company.
Keter began as a workshop in Jaffa in 1948, selling copies of plastic products designed abroad. Under Sami Sagol, who took over from his father in 1971, the company expanded rapidly by creating original products and selling them worldwide.
Today, it operates about 29 plants in the United States and Europe employing about 4,000 people.
Sources told TheMarker that a key condition Sagol made in the sale was that Keter would retain its Israeli operations, which include factories in the Galilee towns of Carmiel and Yokeneam that employ about 1,700 people.
Ehud Ziegelman, who heads the Ziegelman Institute for Business Consulting, told TheMarker over the weekend that ordinarily the Sagols would be subject to a tax of 25-30% on the sale of Keter.
However, since the company has been in the family since 1948 their liability will probably be much lower, although utimately it will depend on how the sale is structured.
Sources close to the Sami Sagol said he planned to use his share to finance a new business in the Internet of things and fund brain research, in particular setting up an international network for researchers in the fields based in Israel.