Markstone Fund Buys Out Steimatzky

Steimatzky is Israel's biggest and oldest bookstore chain, established in 1925.

The Markstone Capital Group acquired the entire Steimatzky chain of book stores and publishing house, which is run jointly with Keter, for $50-60 million on the weekend. The deal also covers Steimatzky's publishing house and operations outside Israel. According to some sources, the price paid was even higher.

Steimatzky is Israel's biggest and oldest bookstore chain, established in 1925. The company has 150 stores and annual sales of about NIS 400 million, excluding the income from its publishing house with Keter.

Last year and even further back, Ari Steimatzky was reportedly negotiating to sell the outfit to other parties, including Discount Investments or Yedioth Ahronoth. Market sources thought that Steimatzky was asking NIS 200 million for the company from Yedioth. Steimatzky and Yedioth refused to confirm these rumors.

Markstone, a private equity fund run by Ron Lubash, Amir Kess and Elliott Broidy, commented that it has no plans to make any changes to the chain's senior personnel. Ari Steimatzky will remain the company's chairman and Yehoshua Mazliach, the CEO, will also remain. Markstone added that it views Steimatzky as a leading brand name and the transaction is for the long-term.

Markstone quickly became the biggest private equity group in Israel, with $800 million under management. It has made several investments before buying the books chain, including the acquisition of Golden Pages (Dapei Zahav), 20 percent of Nilit and 40 percent of the infrastructure company, PRS. It also bought 20 percent of smart irrigation systems maker Netafim, a deal now being closed. It has also been maneuvering to buy Ace Buy & Build, but that transaction is undergoing legal perusal.

As for the Steimatzky buyout, the market in book selling has become fiercely competitive of late. Last week, the chain's management sent a circular to its branch managers: "Publishers at [rival chain] Tzomet Sfarim continually run special offers in which they sell their books at laughable prices either at Tzomet Sfarim or other market outlets, in order to present us as expensive. I ask you to return immediately, en masse, books by Modan, Zmora Beitan, Kinneret, Dvir, Masda, Michevrot L'Sfarut, Alfa. You may leave a small number of bestsellers in the stores."

The circular also demonstrates Steimatzky's strength in the market.

The chain responded: "Modan publishers have recently begun selling books in supermarkets directly to the customers at prices lower than they sell to Steimatzky, and therefore we are forced to sell their books only on demand and not to stock them."