Osem Moving to Buy Materna Maker

The rumors that had been buoying Osem stock for months turn out to be true.

Foodstuffs giant Osem Industries yesterday entered into a memorandum of understanding to buy the 51 percent controlling interest in Materna from Maabarot, a company controlled by Kibbutz Maabarot.

Yes, that's the same Kibbutz Maabarot that makes pet food.

Sources in the market say that Osem's plans to obtain Materna, which were first announced by TheMarker in June 2006, have been responsible for the impressive performance of Osem's share price over the past year and a half.

At the time, the two companies refused to confirm the rumors, perhaps because of the on-again off-again nature of the negotiations between Osem and Maabarot, which went on for ages. But Osem manager Gezi Kaplan recently confided in TheMarker that the next time he talks about Osem and infant food would be in a press conference, when the deal is finalized. Now it's being done.

Osem will pay NIS 249 million for the controlling share, and is getting a call option for the remaining 49 percent, exercisable in 10 years time.

Materna develops, manufactures, markets and distributes various forms of powders and foods for infants. Osem and Materna plan to establish a jointly-owned subsidiary that will operate in Israel. Maalot share prices have 2.3 times since August 2006, and are now traded at prices reflecting a company value of NIS 447 million.

Share prices, which rose by 68 percent early this year, are set to mark five consecutive years of double-digit increases. The current deal reflects a 10 percent premium on Maabarot's value.

Tel Aviv-listed Osem is controlled by the Switzerland-based foodstuffs behemoth Nestle.

Investors in Tel Aviv applauded the deal: Shares in Osem leaped by 4.2 percent yesterday, on respectable turnover, following the news of the Materna takeover in the making, while shares in Maabarot leaped by 11.6 percent.

Speaking with TheMarker, Kaplan stated that Osem views Materna as a future growth driver in its Israeli operations. He also says that Materna will expand beyond its traditional areas to start manufacturing "functional foods" as well.

By the way, the deal hadn't been a make or break. Osem had considered an alternative, of importing parent company Nestle's brand of infant formula, Nan. Nestle also owns the baby foods brand Gerber, by the way, which had opened another option before Osem. But it preferred to buy Materna.