Israeli Food Conglomerate Strauss to End Partnership With Buyout Firm

Strauss to pay whopping 1 billion shekels to get back 25.1% stake held by TPG.

FILE PHOTO: An employee checks coffee, bought by Israeli company Strauss, after it was roasted and ground at a packaging factory in Lod, Israel March 6, 2017. REUTERS/Amir Cohen/File Photo
AMIR COHEN/REUTERS

The Israeli food conglomerate Strauss Group has announced that its Strauss Coffee division will buy back the 25.1% stake in the unit that is held by buyout firm TPG Capital Management, for 1 billion shekels (257 million euros).

The massive transaction will give the company full control over Strauss Coffee, in a move intended to enable Strauss to exercise more strategic and operating flexibility, the company says.

Manufacturer of snacks, fresh foods and coffee, Strauss is the second-largest company in the Israeli food and beverage sector.

The transaction will be carried out in two stages: The first payment, of 172 million euros, was made Monday night when the deal was signed; the final 85 million euros will be paid by mid-August. Strauss Coffee will also cash in on 17 million euros in options granted to management, and cash in or turn over another 2 million euros in options for Strauss Group stock.

TPG has been a partner in Strauss Coffee for the past eight years.

During that period, the two sides disagreed over how the division should be managed.

“Strauss Israel continued to exceed market growth rates in our home base in Israel, and Strauss Coffee posted a set of excellent results for 2016,” Strauss president and CEO Gadi Lesin said.

On Tuesday Strauss reported a 22% drop in quarterly net profit, the result of a recall in November of its Sabra brand dips and spreads in the United States Lesin said that the recall of Sabra products, which his company estimated at the time would hurt operating profits by $5 million, “is being responsibly managed to ensure a return to solid performance.”

Strauss reported an adjusted net profit of 58 million shekels ($16 million) in the fourth quarter, down from 74 million shekels the previous year.

Revenue rose 7.2% to 2.03 billion shekels. Coffee sales grew 21% to 1.06 billion shekels in that quarter as EBIT profit rose to 84 million shekels. Operating profit was down 14.4% for the quarter.

Sales internationally of its dips and spreads as part of joint ventures with PepsiCo fell 27%.